Services received in India and not those received by an Indian are taxable – controversy put to rest
As per the explanation to Section 65(105) inserted by Finance Act, 2005, any service received by an Indian from a service provider abroad even if the service is rendered abroad was made taxable. This controversial clause is under challenge in the Madras High Court. Now the controversy is put to rest by several legislative provisions including its deletion..
As per Section 68, the government can notify any person other than the service provider to be the person responsible for paying Service Tax in respect of certain services like the recipient in the case of GTA. Notification No. 36/2004 dated 31.12.2004 had stipulated any taxable service provided by a person who is a non-resident or is from outside India, does not have any office in India under this. Now this notification is amended to any taxable service provided or to be provided from a country other than India and received in India, under section 66A of the Finance Act, 1994.
Rule 2(1)(d)(iv) of the Service Tax Rules had stipulated the Indian recipient to be the Person liable for paying service tax, in tune with the explanation to Section 65(105). With the explanation going, the rule also needed an amendment. Now this rule reads as
“(iv) in relation to any taxable service provided or to be provided by any person from a country other than India and received by any person in India under section 66A of the Act, the recipient of such service;”.
So the receipt in India of the service is made clear.
Notification No. 9, dated 19th April, 2006