Service Tax on Export of Services

Service Tax on Export of Services

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Service Tax on Export of Services

Service tax on service exports comes under the purview of the Export of Service Rules, 2005. Similar to export of goods from India, services can also be exported without payment of service tax or duties. However, it is important to understand the Export of Service Rules, 2005 to judge if a service provided will be regarded as export of service. If a service rendered is not judged as an export of service, then service tax is applicable.

Service Tax on Exports

In the above video, Mr. S. Jaikumar, Advocate, Swamy Associates explains the applicability of service tax on export of services.

What is Export of Services?

Services that are deemed to be export of services are exempt from service tax. As per the Service Tax Rules, any service provided or agreed to be provided shall be treated as export of service if all of the below mentioned conditions are met:

  • The provider of service is located in India, except the State of Jammu & Kashmir.
  • The recipient of service is located outside India.
  • The service is not specified in the negative list of the service tax act.
  • The place of provision of the services is outside India .
  • The payment of service has been received by the provider in convertible foreign exchange.
  • The provider of service and recipient of service are not merely establishments of a distinct person.

Some of the conditions listed above are discussed in detail below.

Negative List of Service Tax

The negative list of service tax contains activity for which service tax is not applicable. Some of the items in the negative list of service tax are:

  1. Services by the Reserve bank of India;
  2. Services by a foreign diplomatic mission located in India.
  3. Trading of goods.
  4. Any process amounting to manufacture or production of goods.

Place of Provision of Services

Place of provision of services plays an important role in determining the applicability of service tax on export of services. The place of provision of service is usually the location of service recipient. If the location of service recipient is not available, then the location of service provided will be as per the place of provision of services.

Payment in Convertible Foreign Exchange

For a service to be deemed as an export of service, the payment for the service must be received in convertible foreign exchange. The service recipient maybe required to produce evidence of receipt of the payment in convertible foreign exchange in order to claim the benefit of rebate.

Not Merely Establishments of a Distinct Person

If a person has one establishment in a taxable territory and another establishment in a non-taxable territory, services provided by the establishment belonging to the person will not be treated as export of service.

Service Export from India Scheme

Service exported from India is eligible for reward of duty credit scrips under the Service Exports from India Scheme (SEIS). Hence, in addition to exemption of service tax, service exporters are eligible to receive upto 5% duty credit scrip under the Service Export from India Scheme.

To consult a service tax consultant on export of service from India, visit or Nearest.Expert

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