EXPORT / IMPORT OF
SERVICES UNDER NEGATIVE LIST
BASED TAXATION
-By CA R S PAVAN KUMAR
B.Com, FCA
1
Service Tax based on Negative List
► Until June 30, 2012 the levy of service tax was applicable only
on 119 notified services.
► With effect from July 1, 2012, service tax is being levied on all
services unless they are covered by any of the entries in the
negative list or are otherwise exempted.
► The Export of services and Import of service Rules notified
under the earlier regime have been scrapped and place of
provision of services has been introduced
► Rule 6A under the Service tax Rules 1994 has been introduced
to provide the conditions required to be satisfied for qualifying as
an export of service.
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-By CA R S PAVAN KUMAR
B.Com, FCA
How to determine exports – Rule 6A
Following are the essentials to consider a service as exported:
► The provider of service is located in the taxable territory,
► The recipient of service is located outside India,
► The service is not a service specified in Section 66D of the act,
► The place of provision of the service is outside India,
► The payment for such service has been received by the provider
of service in convertible foreign exchange, and
► The provider of service and recipient of service are not merely
establishments of a distinct person in accordance with the item
(b) of explanation 3 of Section 65B(44) of the act.
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-By CA R S PAVAN KUMAR
B.Com, FCA
Charging Section
Section 66B
► There shall be levied a tax(hereinafter referred to as “service
tax”)
► At the rate of twelve percent
► On the value of all services(other than those covered under
negative list)
► Provided or agreed to be provided in the taxable territory
► By one person to another and
► Collected in such a manner as may be prescribed
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-By CA R S PAVAN KUMAR
B.Com, FCA
Taxable Territory
Taxable Territory
The territory to which
Finance Act, 1994
shall apply
Finance Act, 1994
extends to whole of
India except J&K.
Taxable Territory = India
India Means=
Clauses (2) and (3) of Article 1 of the Constitution.
Its territorial waters, continental shelf(CS), exclusive economic zone (EEZ)or any other maritime
zone as defined in the Maritime Zones Act, 1976;
Seabed and the subsoil underlying the territorial waters;
The air space above its territory and territorial waters; and
The installations, structures and vessels located in the CS and the EEZ of India, for the purpose of
extraction or production of mineral oil and natural gas and supply there of;
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-By CA R S PAVAN KUMAR
B.Com, FCA
Implication
► Service qualifying as export service is not leviable to service tax
► Any service provided not qualifying as an export service but
provided outside the taxable territory is also not is not leviable to
service tax
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-By CA R S PAVAN KUMAR
B.Com, FCA
How to determine exports – Rule 6A
Following are the essentials to consider a service as exported:
► The provider of service is located in the taxable territory,
► The recipient of service is located outside India,
► The service is not a service specified in Section 66D of the act,
► The place of provision of the service is outside India,
► The payment for such service has been received by the provider
of service in convertible foreign exchange, and
► The provider of service and recipient of service are not merely
establishments of a distinct person in accordance with the item
(b) of explanation 3 of Section 65B(44) of the act.
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-By CA R S PAVAN KUMAR
B.Com, FCA
Determination of Location
Whether registered under service
tax laws?
YES
The Premise covered under such
registration
NO
The location of business
establishment / fixed establishment
/ establishment most directly
concerned with the provision of the
service
NO
Usual place of residence
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-By CA R S PAVAN KUMAR
B.Com, FCA
How to determine exports – Rule 6A
Following are the essentials to consider a service as exported:
► The provider of service is located in the taxable territory,
► The recipient of service is located outside India,
► The service is not a service specified in Section 66D of the act,
► The place of provision of the service is outside India,
► The payment for such service has been received by the provider
of service in convertible foreign exchange, and
► The provider of service and recipient of service are not merely
establishments of a distinct person in accordance with the item
(b) of explanation 3 of Section 65B(44) of the act.
9
-By CA R S PAVAN KUMAR
B.Com, FCA
How to determine exports – Rule 6A
Following are the essentials to consider a service as exported:
► The provider of service is located in the taxable territory,
► The recipient of service is located outside India,
► The service is not a service specified in Section 66D of the act,
► The place of provision of the service is outside India,
► The payment for such service has been received by the provider
of service in convertible foreign exchange, and
► The provider of service and recipient of service are not merely
establishments of a distinct person in accordance with the item
(b) of explanation 3 of Section 65B(44) of the act.
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-By CA R S PAVAN KUMAR
B.Com, FCA
Place of Provision of Services
Rules for determining the place where the services are provided
► Follows the global practice of consumption based taxation
► Rule 3: Place of provision generally
► Rule 4: Place of provision for performance based services
► Rule 5: Place of provision for immovable property related service
► Rule 6: Place of provision of services relating to events
► Rule 9: Place of provision of specified services
► Rule 10: Place of provision of goods transport services
► Rule 11: Place of provision of transportation services
► Rule 12: Place of provision of services provided on board a
conveyance
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-By CA R S PAVAN KUMAR
B.Com, FCA
Place of Provision of Service
Rule 12
Provided on Board on
a conveyance
The place of first scheduled departure
of that conveyance(any conveyance)
Some Examples:
Movies, Music, Entertainment
on demand
The place of provision for
said services need not be
determined if it is provided
as part of the fare
Internet services
Health & Fitness Services
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-By CA R S PAVAN KUMAR
B.Com, FCA
Place of Provision of Service
Rule 11
Passenger
Transportation
The place where the passenger
embarks for a continuous journey
Rule 10
Goods Transportation
Service
The place of destination of goods
(excluding mail & courier), however in
case of GTA, the location of person liable
to pay tax
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-By CA R S PAVAN KUMAR
B.Com, FCA
Place of Provision of Service
Rule 9
Specified Services
The location of service provider:
Following are the specified services:
► Services of following companies to its account holders:
► Banking company
► Financial institution
► NBFC
► Hiring a means of transport upto a period of one month
► Online information and database retrieval services
► Intermediary Service
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-By CA R S PAVAN KUMAR
B.Com, FCA
Online Database and Retrieval Services
Services provided in relation to online information and database access or
retrieval or both, in electronic form through computer network, in any manner.
Examples
Exclusions
► Web based services
providing trade
statistics, legal and
financial data,
matrimonial services
► Sale of goods
► Telecommunication
Services
► Services capable of
being rendered over
internet. Eg:
Consultancy
► Social networking sites
► Services providing
access or download of
digital content
► Repair of software or
hardware
► Internet Access Service
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-By CA R S PAVAN KUMAR
B.Com, FCA
Intermediary Service
Intermediary means a broker, an agent or any other person who arranges or
facilitates a provision of a service between two or more persons but does not
include the service provider himself.
Examples
► Travel Agent
► Recovery Agent
► Commission Agent for
any service
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-By CA R S PAVAN KUMAR
B.Com, FCA
Place of Provision of Service
Rule 6
Events
The place where the event is actually
held
Specifically Included
Admission to/organization
of:
► Cultural, Artistic
► Sporting, Scientific
► Educational, Fair
► Entertainment Events
► Conference
► Exhibition, etc &
► Services ancillary to
above
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-By CA R S PAVAN KUMAR
B.Com, FCA
Place of Provision of Service
Rule 5
Immovable Property
The Place where the immovable
property is located or intended to be
located
Specifically Included
► Estate Agents
► Hotel, Guest House,
Inn or Camp Site
Accommodation
► Renting
► Construction
► Services by Experts
18
-By CA R S PAVAN KUMAR
B.Com, FCA
Place of Provision of Service
Rule 4(a)
Performance Based
Service
1
The location where the services are
actually performed
Services in respect goods that are required to
be made physically available by Receiver of
Service to Provider of Service in order to
provide service
Example: Repair service, testing
service, storage service, etc
If the above mentioned services are provided from a remote location by
way of electronic means, then the place of provision of service shall be
the location where goods are situated.
The above mentioned criteria shall not apply in case of goods imported
temporarily into India for repairs / reconditioning for re-export
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-By CA R S PAVAN KUMAR
B.Com, FCA
Place of Provision of Service
Rule 4(b)
2
The services provided to an individual which
require the physical presence of the receiver
or his agent for provision of service
Example: Health & Fitness,
Commercial Training, Photography
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-By CA R S PAVAN KUMAR
B.Com, FCA
Place of Provision of Service
Rule 3
In General
The Location of Recipient of Service
Some Examples:
Management Consultancy
Services
Credit Rating
Catering Service
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-By CA R S PAVAN KUMAR
B.Com, FCA
Place of Provision of Service
Rule 8
Provider and Recipient
in the same taxable
territory
The location of recipient of service
An Example:
An aircraft of Company ABC develops a
technical snag in UK, hence Company XYZ
deputes its engineers in UK:
Rule 8: POP is India
Rule 7
More than one
location (Rules 4,5,6)
The place where the greatest
proportion of service is provided.
22
-By CA R S PAVAN KUMAR
B.Com, FCA
Place of Provision of Service
Rule 14
Order of Application
The rule that occurs later among the
rules that merit equal consideration.
An Example:
An architect based in Mumbai provides his
service to an Indian Hotel Chain located in New
Delhi to provide his service to newly acquired
property in Dubai
Rule 4: POP is Dubai | Rule 8: POP is New Delhi
Rule 14: POP is New Delhi
23
-By CA R S PAVAN KUMAR
B.Com, FCA
How to determine exports – Rule 6A
Following are the essentials to consider a service as exported:
► The provider of service is located in the taxable territory,
► The recipient of service is located outside India,
► The service is not a service specified in Section 66D of the act,
► The place of provision of the service is outside India,
► The payment for such service has been received by the provider
of service in convertible foreign exchange, and
► The provider of service and recipient of service are not merely
establishments of a distinct person in accordance with the item
(b) of explanation 3 of Section 65B(44) of the act.
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-By CA R S PAVAN KUMAR
B.Com, FCA
Convertible FE – Some Issues
Consequences of not repatriating the funds in CFE or within the time limit
allowed by RBI(6 months):
According to Rule 6(8) of
CCR, 2004 EOS will be
considered as exempt service
Reversal of CENVAT Credit on
account of exempt service
Following issues will arise:
What should be the classification of service while filing ST3? EOS or
Exempt?
Whether a separate refund application needs to be filed for refund of
credit reversed or can the exporters suo moto avail the CENVAT Credit?
25
-By CA R S PAVAN KUMAR
B.Com, FCA
How to determine exports – Rule 6A
Following are the essentials to consider a service as exported:
► The provider of service is located in the taxable territory,
► The recipient of service is located outside India,
► The service is not a service specified in Section 66D of the act,
► The place of provision of the service is outside India,
► The payment for such service has been received by the provider
of service in convertible foreign exchange, and
► The provider of service and recipient of service are not merely
establishments of a distinct person in accordance with the item
(b) of explanation 3 of Section 65B(44) of the act.
26
-By CA R S PAVAN KUMAR
B.Com, FCA
Export of Services - Benefits
► Availability of CENVAT Credit of Excise Duty / Service Tax /
Additional Customs Duty paid on inputs / input services used in
the provision of Export of Service
► Refund of Unutilised CENVAT Credit or Rebate
► Rebate of service tax or duty paid on input services or inputs
used in providing such service
► Incentive schemes introduced by Services Export Promotion
Council
27
-By CA R S PAVAN KUMAR
B.Com, FCA
Refund of CENVAT Credit – A Glimpse
Notification No. 27/2012 – CE(N.T.)
► Certain Conditions and Limitations
► Only 1 refund claim per quarter (period of 3 months from 01st April)
► Refund shall not exceed the balance lying in the CENVAT credit register as
at the end of quarter or at the time filing application w.e.l
► A debit to the CENVAT credit register
► In case the refund sanctioned is lesser than the claim, then corresponding
credit to the register.
► Submission of application in Form A to CCEx or DCEx
► Time limit = time limit under Section 11B of CEA, 1944
► Refund claim supported by certificate of statutory or other auditor
in Form A1.
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-By CA R S PAVAN KUMAR
B.Com, FCA
Rebate of Service Tax – A Glimpse
Notification 39/2012 – Service Tax
► Certain Conditions and Limitations:
► Service has been exported in terms of Rule 6A
► All the duties, service tax and cess has been paid
► No CENVAT Credit has been claimed
► File declaration with ACCEx or DCEx with specifiying description,
value, amount of service tax & cess to be used in EOS
► Verification of declaration by the ST Authorities
► File of rebate claim in Form ASTR -2 after the service has been
exported
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-By CA R S PAVAN KUMAR
B.Com, FCA
Definition of Exempt Service
► Taxable service exempt from whole of service tax
► Service on which no service tax is leviable
► Services whose part of the value is exempted by on the condition
that no CENVAT Credit shall be availed on inputs and input
services (Notification 01/2011 – C.E.)
► Excluding services exported in terms of Rule 6A of STR, 1994.
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-By CA R S PAVAN KUMAR
B.Com, FCA
Import of Services
► Import of Services Rules, 2005 is now redundant
► Any service provided from outside the Taxable Territory and
received by a person within the Taxable Territory, then recipient is
liable to pay service tax – Notification No 30/2012
31
-By CA R S PAVAN KUMAR
B.Com, FCA
Case Study 1
India
Outside India
Company ABC
1
Company XYZ
2
Clients of ABC
1: Contract for providing on call support services in relation to
products of ABC
2: XYZ to provide on call support services to clients of ABC located
outside India
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-By CA R S PAVAN KUMAR
B.Com, FCA
Case Study 2
India
Outside India
Company ABC
1
Company XYZ
2
1: ABC sends drug samples for testing to XYZ at its facility in India
2: XYZ conducts tests and provides reports to ABC
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-By CA R S PAVAN KUMAR
B.Com, FCA
Case Study 3
India
Outside India
Company ABC
1
Company XYZ
2
Manpower of
XYZ
1: Contract for supply of manpower by XYZ for development of
software under the direction of ABC
2: Manpower deployed at the facility of XYZ in India
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-By CA R S PAVAN KUMAR
B.Com, FCA
Case Study 4
India
Outside India
Company ABC
1
Company XYZ
Situation 1: The goods sent by ABC to XYZ for repairs
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-By CA R S PAVAN KUMAR
B.Com, FCA
Case Study 5
India
Outside India
Company ABC
1
Company XYZ
Server
Situation 1: The goods were repaired remotely by Company XYZ
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-By CA R S PAVAN KUMAR
B.Com, FCA
Case Study 6
Outside India
Country X
AAA-X
Subsidiary
AAA
Parent
Agreement
Framework
Actual
Rendition
Service 2
Agreement 3
BBB-X
Subsidiary
Agreement 2
[Service 1]
AAA-X
Subsidiary
Actual
Rendition
BBB
Parent
37
BBB-X
Subsidiary
Outside India
Country Y
Agreement 4
Service 3
Case Study 7
Outside India
India
Country X
AAA-X
Subsidiary
Service 4
AAA
Parent
Actual
Rendition
Service 2
BBB-X
Subsidiary
Outside India
Country Y
Service 1
Service 5
AAA-Y
Subsidiary
Actual
Rendition
BBB
Parent
38
Service 3
BBB-Y
Subsidiary
Questions?
?
39
-By CA R S PAVAN KUMAR
B.Com, FCA
Thank You
Mobile: +91 99456 66773
Phone: 080 – 4204 0581 / 82
E-Mail: pavan.kumar@rspadvisors.com
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