'No service tax is payable by job-workers on processes amounting to manufacture'
October, 30th 2012
Are we required to pay duty on goods destroyed in a fire within a special economic zone (SEZ), which were imported from abroad or procured from domestic tariff area (DTA), when the insurance company has settled our claim? Rule 39(4) of SEZ Rules, 2005 requires you to pay drawback or Duty Entitlement Passbook (DEPB) or any other export incentive claimed on such goods procured from DTA, but not if you have paid for them in foreign exchange. On imported goods, the SEZ Rules are silent but the tribunal has held that no duty is payable in the case of Satguru Polyfab Pvt Ltd [2011 (267) ELT 273 (Tri. Ahmd.).
We manufacture excisable goods. We send some material for job-work. Are job-workers required to pay service tax? No service tax is payable on any process amounting to manufacture or production of goods by your job-worker, as that activity falls under the negative list under Section 66D (f) of the Finance Act, 1944. Also, S. No. 30 (c) of notification no. 25/2012-ST dated June 20, 2012 exempts carrying out any intermediate production process as job-work in relation to any goods on which appropriate duty is payable by the principal manufacturer. S. No. 30 also covers certain other activities of job-work.
I represent a US company to give talks and take calls about their online software in India. All costs for my travel, stay, etc, are borne by them directly. They earn income from subscribers who apply and pay directly online. I am paid a stipend. Am I required to pay service tax?
Assuming that you do not have an employer-employee relationship with your principal, you promote or cause sale or facilitate provision of a service of your principal (a foreign entity) and so your service will be covered under the definition of intermediary services given at Rule 2(f) of the Place of Provision of Rules, 2012. According to Rule 9 (c) of the said Rules, the place of provision of your services shall be the location of the service provider. Therefore, your services shall be deemed to be provided in the taxable territory and you, as the service provider, will be required to discharge the tax liability.
As indenting agents, we book orders for our Chinese principals (manufacturers). Are we required to pay service tax on our commission earned in foreign exchange from Chinese principals for whom we book orders? Rule 2(f) of the Place of Provision of Services Rules, 2012 does not cover an intermediary who causes sale or purchase of goods or arranges goods. In such cases, as per Rule 3 of the said Rules, the place of the receiver of the service is the place of provision of services. Therefore, in your case, it would amount to provision of service in a non-taxable territory and would be treated as export of services as per Rule 6A of Service Tax Rules, 1994. So, you need not pay service tax on the commission that you earn as an indenting agent.