Those providing services abroad are liable to pay service tax'
December, 11th 2012
We have an order from Bharat Heavy Electricals, or BHEL to provide erection services for a power project abroad. Our work order is in dollars. So, we have the option to receive payment in dollars or rupees. Are we liable to charge service tax?
According to Rule 8 of the Place of Provision of Services Rules, 2012, Place of provision of a service, where the location of the provider of service as well as that of the recipient of service is in the taxable territory, shall be the location of the recipient of service. Rule 14 of the said rules notes, Notwithstanding anything stated in any rule, where the provision of a service is, prima facie, determinable in terms of more than one rule, it shall be determined in accordance with the rule that occurs later among the rules that merit equal consideration. Therefore, the said Rule 8 will prevail over Rule 4 (relating to performance-based services) and Rule 5 (relating to immovable property) of the said rules. This position is also clarified at Para 5.8.2 of the Educational Guide of the CBEC on Taxation of Services. Therefore, in my opinion, you are liable to pay service tax.
We provide sourcing services to our foreign clients the services of locating suppliers in India and booking orders for supply of goods from India to buyers abroad and we receive commission in foreign exchange for the services. Under which category of service (sector and sub-sector of Appendix 41 of the Handbook of Procedures, Volume 1) will our service fall for the purpose of claiming the benefits of the served from India Scheme under the Foreign Trade Policy? Your service the service of causing purchase of goods or a commission agents service does not find mention in the said Appendix-41.
Can we fulfil export obligation against advance authorisation by export of B-grade quality goods? The DGFT Policy Interpretation Committee in its meeting dated 8.3.2011 ruled that in the Advance Authorisation Scheme, as long as the imported inputs are accounted for, access to duty free inputs for manufacture of the export product, irrespective of its quality (unless otherwise specified), is available to the firm. Neither the Advance Authorisation Scheme nor the General Note for Textiles (HBP v2) specifies as to whether the final product could be of only prime quality, unless the specific SION/ad hoc norms refer to the grade of the Export Product. Such a specific restriction has only been stated at Sl. No. 7 of the General Note for Engineering Product and not for other products. Therefore, so long as the quality is not stated or does not differ from what is stated in the advance authorisation, there is no bar on exporting B-grade quality goods, so long as utilisation of the inputs is fully accounted for. The period for realisation of export proceeds was extended to 12 months till September 30, 2012. Is the facility available now?
Yes. AP ( DIR) Circular no.52 dated 20.11.2012 extends the facility till March 31, 2013.