sitemapHome | Registration | Job Portal for CA's | Expert Exchange | Currency Converter | Post Matrimonial Ads | Post Property Ads
News shortcuts: From the Courts | News Headlines | VAT (Value Added Tax) | Placements & Empanelment | Various Acts & Rules | Latest Circulars | New Forms | Forex | Auditing | Direct Tax | Customs and Excise | ICAI | Corporate Law | Markets | Students | General | Mergers and Acquisitions | Continuing Prof. Edu. | Budget Extravaganza | Transfer Pricing | GST - Goods and Services Tax
Latest Expert Exchange
News Headlines »
 Don’t invest in the names of multiple family members to avoid paying income tax
 Master Direction – Reserve Bank of India (Relief Measures by Banks in Areas affected by Natural Calamities) Directions 2018 – SCBs
 Tax on gifts? Always tax-free, if received from relativesa
 Notification No. 76/2018 – Customs Ministry Of Finance
 The only receipt that remains tax-exempt
 Central Goods and Services Tax (Eleventh Amendment) Rules, 2018
 Know how you can save tax on capital gains
 CBDT extends deadline Income tax return (ITR) filing
 Notification Ministry Of Finance
 Gifts from relatives are always tax-free
 Notification No. 85/2018 - Customs (N.T.) Central Board Of Indirect Taxes And Customs

Tax norms for foreign service providers still confusing
November, 06th 2007
If you thought that the vexed question of deciding the situs of services for the purpose of service tax levy has died its natural death following the introduction to import and export rules in service taxation, its time for a rethink.

For those, who are not tax-savvy, situs in the context of tax law is the place where a particular income, service or transaction can be legitimately taxed by a given authority. For example, the service tax norms in India provide that the tax law applies to whole of India, excluding the state of Jammu & Kashmir.

The question that arises is in relation to services provided by non-resident service providers. To this, the government promptly clarified that services rendered from outside India will not be liable to service tax in India. Therefore, by applying the situs theory as explained by the government in its circular, services provided from or within India were liable to service tax in India.

Admittedly, the above clarification will now have to be read in the context of the newly introduced import, export rules for services to determine taxability of a particular service, though, that is besides the subject matter of this article.

With respect to non-resident service providers, initially they were liable to pay service tax either themselves or through appointed agents if they did not have an office in India.

However, to ensure greater compliance and control on such tax payments, on August 16, 2002, the government amended the rules in this regard and shifted the responsibility of payment of service tax with regard to services availed from non-resident service providers to Indian service recipient. However, this amendment did not change the underlying principle that service provided from outside India should not be taxed.

What the amendment of August 16, 2002, meant was if the non-resident service provider provided any services from India (by visiting India) then in such cases the Indian service recipient would be obliged to discharge service tax on such services. In fact, this position stands vindicated by various court rulings and is in conformity with the circular issued by the government in this regard.

However, recently there are instances where assessees are being asked to provide information on services availed from non-resident service providers from August 16, 2002, onwards, presumably based on certain clarification issued by CBEC officials to the Director-General of Service Tax.

In this regard one needs to understand that services provided by non-resident service provider can be classified into two categories. One, services provided by a non-resident service provider from outside India and two, services provided by a non-resident service provider within India.

With respect to the second category, there should not be any doubt that if such services were classifiable under any of the taxable service categories, then service tax on the same should have been paid by the service recipient in India.

With respect to the first category i.e., services provided by a non-resident service provider from outside India, the same cannot be levied with service tax prior to June 2005 i.e., the date when explanation was inserted in the definition of taxable services making such services taxable irrespective of its place of performance, or April 2006 when a specific section was inserted in lieu of an above explanation, along with rules prescribing parameters to determine import of services.

The reason of mentioning two dates of applicability of service tax is due to there being two views existing on applicability of service tax on services provided by non-resident service providers.

Last but not the least, there have been a number of tribunal decisions by now to hold that in cases where services were availed from non-resident service providers, the government cannot levy and collect service tax on the same prior to January 1, 2005, i.e., the date when these services were notified to be taxable in the hands of its recipient.

Given this, where services are provided from outside India, it cant be taxed in India prior to June 16, 2005, and in a best case scenario prior to April 18, 2006. It will be a great service if CBEC promptly clarifies the above position to the field formations before they initiate inquiry and incur huge amount of time and efforts of the industry and also of themselves in trying to detect a revenue leakage which does not exist.

Sachin Menon & Prasad Paranjape
(The authors are executive directors at PricewaterhouseCoopers)
Home | About Us | Terms and Conditions | Contact Us
Copyright 2018 CAinINDIA All Right Reserved.
Designed and Developed by Binarysoft Technologies Pvt. Ltd.
Enterprise Resource Planning Solutions ERP Solutions Enterprise Resource Planning Software Solutions ERP Software Solutions Supply Chain Management Solutions SCM Solutions Supply Chain Management Software Solutions SCM Software Solutions Enterprise Resource Planning Solutions India ERP Solutions India Enterprise Resource Planning Software Solutions India ERP Software Solutions India Supply Chain Management Solutions India SCM Solutions India Supply Chain Management Software Solutions India SCM Software Solutions India

Transfer Pricing | International Taxation | Business Consulting | Corporate Compliance and Consulting | Assurance and Risk Advisory | Indirect Taxes | Direct Taxes | Transaction Advisory | Regular Compliance and Reporting | Tax Assessments | International Taxation Advisory | Capital Structuring | Withholding tax advisory | Expatriate Tax Reporting | Litigation | Badges | Club Badges | Seals | Military Insignias | Emblems | Family Crest | Software Development India | Software Development Company | SEO Company | Web Application Development | MLM Software | MLM Solutions