Foreign Service – Indian Tax
The Service Tax on services received abroad/received from abroad has been a cause of confusion and litigation. The TRU gives a few valuable clarifications.
In the Budget for 2006-07, Explanation to clause (105) of section 65 providing for charging of service tax on taxable services received from outside India has been omitted and for this purpose a new section 66A has been incorporated in the Finance Act, 1994.
It may be noted that only services received in India are taxable under these provisions. – This is a wonderful clarification. Let us hope the field follows it.
The service provider should be outside India and the recipient of service should be in India. However, taxable services received by individuals from outside the country for non-business purposes are not leviable to service tax.
Provision of service by a permanent establishment outside India to another permanent establishment of the same person in India is treated, for the purpose of charging service tax, as provision of service by one person to another person.
Three categories of foreign service
1. Ten specified taxable services, which are provided from outside India in relation to an immovable property situated in India
2. Specified taxable services, which involve physical performance if such services are partly or wholly performed in India.
3. Taxable services, not covered under the two categories specified above. Taxable services are received by a recipient located in India for use in relation to commerce or industry.
This service will not be deemed as output service – means pay Service Tax by cash, credit not allowed. But the same will now apply to GTA?
The TRU clarification also has a disclaimer – “The above explanation of the changes of law is only for the purpose of guidance to facilitate understanding and implementation. It is not a part of law and does not override it. Adequate care may be taken to carefully read the relevant provisions of law.”
F.No. B1 / 4 / 2006-TRU dated the 19th April, 2006