Tax is not payable on services that are provided in non-taxable areas'
March, 24th 2015
We are manufacturers of textiles and status holders. We buy Status Holder Incentive Scrips (SHIS) exclusively of 'Textile/Jute Sector', for import/domestic procurement of capital goods (CG) for our textile manufacturing units. SHIS issued to 'Textile/Jute Sector' are in short supply. Can we purchase SHIS pertaining to other sectors and utilise them for our CG imports/domestic procurement?
As per Para 3.16.3 of the Foreign Trade Policy (FTP), SHIS shall be used for import of CG relating to sectors specified in Para 3.16.4 of FTP and para 3.10.8 of Handbook of Procedures, Vol 1. So, you can procure any SHIS and use it for your own purpose.
As exporters of terry towels, we pay commission of 10 per cent of FOB value to our foreign agents for the orders booked by them. We were claiming exemption from payment of service tax on the commission amount paid to agents located outside India under Notification No. 42/2012 dated June 29, 2012. As this notification has been rescinded on February 28, 2015, please clarify whether we have to pay service tax on commission paid to the agents located outside India?
Notification 14/2014-ST dated July 11, 2014 substituted clause 2(f) of Place of Provision of Rules, 2012 with effect from October 1, 2014 defining "intermediary" as a broker, an agent or any other person, by whatever name called, who arranges or facilitates a provision of a service (hereinafter called the 'main' service) or a supply of goods, between two or more persons, but does not include a person who provides the main service or supplies the goods on his account.
Thus the service of commission agent abroad for supply of goods got covered under Rule 9(c) of the said Rules and for such services the location of service provider became the place of provision of service. As service tax is not leviable on services provided in non-taxable territory, no tax was payable on services of the commission agent located abroad with effect from October 1, 2014. The said Notification 42/2012-ST has been rescinded because it had become redundant.
We are working as outsourcing agent - as agent only for export of yarn from third country to third country (i.e. China to Egypt, or Germany to Singapore, etc.). The goods do not enter India. We only provide the service of concluding the contract, follow-up of shipment and payment. On completion of the deal we get remittance of commission amount in US dollars. Are we required to pay service tax?
In your case, for the intermediary services provided by you, the place of provision of service is the location of service provider, as explained above in the answer to the previous question. Therefore, your services will attract service tax and you will have to discharge the tax liability.
Can we get any benefits such as advance licence or EPCG licence or drawback or Chapter 3 benefits on exports to Nepal and Bhutan in US dollars? Yes. For drawback, the payment should come through letter of credit in freely convertible currency established by the importer in Nepal or Bhutan.