Service Tax - Export of Services - 'Used Outside India' - Clarification worse than Confusion
ONE condition for export under the Export of Services Rules was that the service is provided from India and “used outside India”. Board Circular No.111/05/2009-ST, dated 24.02.2009 had clarified on the expression “used outside India” in Rule 3(2)(a) of the Export of Service Rules 2005 as prevalent at that time. The condition specified in Rule 3(2)(a) has since been omitted vide Notification 06/2010-ST dated 27 Feb 2010.
It seems an issue had been raised as to whether for the period prior to 28.2.2010 the requirement that the service should be “used outside India” invariably means the location of the recipient?
Board says, “In the stated Circular it was inter-alia, clarified that the words, “used outside India” should be interpreted to mean that “the benefit of the service should accrue outside India”. It is well known that services, being largely intangibles, are capable of being paid (maybe what they meant was provided) from one place and actually used at another place.”
More wisdom from the Board:
These words should be given a harmonious interpretation keeping in view that during the period upto 27.2.2010 the explicit condition was provided in the rule that the service should be used outside India. In other words (when you say “in other words”, what you mean is that the previous words were not clear) these words may be interpreted in the context where the effective use and enjoyment of the service has been obtained.
This, however should not apply to services which are merely performed from India and where the accrual of benefit and their use outside India are not in conflict with each other. (What is the conflict?)
The Circular No.111/05/2009-ST explained the expression “used outside India” only and the other conjunct conditions, as applicable from time to time, also need to be independently satisfied for availing the benefit of an export.
Now what does this Circular clarify? If I am an agent in India for a foreigner to sell his goods in India and I get a commission, am I an exporter of service or an importer? Conversely, if I pay commission to a foreign agent to sell my goods abroad, am I an exporter or an importer of service? Can the Board clarify these questions in one word – YES or NO? If they do it, all the litigation will end – of course Tribunal willing.
Please also see -24.08.2009 and Export of Service : To deliver or to provide is the question?
CBEC Circular No. 141/10/2011 – TRU ., Dated: May 13, 2011