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:

Services by the Reserve bank of India;
Services by a foreign diplomatic mission located in India.
Trading of goods.
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 IndiaFilings.com or Nearest.Expert

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Frequently Asked Questions

Common questions about Service Tax on Export of Services from India.

Export of Services refers to services provided by an entity located in India to a recipient located outside India, subject to certain conditions specified under the Service Tax Rules, 2005. Services that qualify as "Export of Services" are exempt from service tax.

For a service to be considered as Export of Services, the following conditions must be met: (i) The service provider is located in India (except Jammu & Kashmir), (ii) The service recipient is located outside India, (iii) The service is not included in the negative list of the Service Tax Act, (iv) The place of provision of the service is outside India, (v) The payment for the service is received in convertible foreign exchange, and (vi) The service provider and recipient are not merely establishments of a distinct person.

The "Negative List" under the Service Tax Act specifies the services that are not eligible for service tax exemption, even if they meet the other conditions for Export of Services. If a service is included in the Negative List, it cannot be considered as Export of Services and will be subject to service tax.

The Place of Provision of Services is a crucial factor in determining whether a service qualifies as Export of Services. If the Place of Provision of Services is outside India, it meets one of the conditions for being considered as Export of Services, and the service may be exempt from service tax.

Receiving payment in Convertible Foreign Exchange is one of the mandatory conditions for a service to be considered as Export of Services. If the payment is received in Indian Rupees or any other non-convertible currency, the service will not qualify as Export of Services and will be subject to service tax.

No, services provided between establishments of the same entity (distinct person) cannot be considered as Export of Services, even if they meet the other conditions. The service provider and recipient must be separate entities for the service to qualify as Export of Services.

The Service Exports from India Scheme (SEIS) is a scheme under which service exporters from India are eligible to receive duty credit scrips of up to 5% of their net foreign exchange earnings. This scheme incentivizes and promotes export of services from India.

While it is not mandatory, consulting a service tax consultant or an expert can be beneficial for understanding the nuances of the Export of Service Rules and ensuring compliance with the relevant regulations. Experts can provide guidance on eligibility criteria, documentation requirements, and procedures for claiming service tax exemption and SEIS benefits.

To claim service tax exemption for Export of Services, service providers may need to maintain and provide documentation such as contracts, invoices, proof of payment in convertible foreign exchange, and other relevant evidence to establish that the service meets the Export of Services conditions.

Yes, non-compliance with the Export of Service Rules or providing incorrect information can lead to penalties, including denial of service tax exemption, recovery of service tax with interest, and potential legal action. It is crucial to ensure proper understanding and adherence to the relevant rules and regulations.