As in the case of export of goods from India, there exists a provision for the export of service without any payment of service tax or duties. In India, the service tax on service exports is governed by the Export of Service Rules, 2005. Therefore it becomes extremely important for us to understand the Export of Service Rules, 2005 to see if a service rendered is an export of service as this determines if the service tax will be applicable or not.
For this we first need to understand what Export of Services is, as all those services that are considered to be export of services are exempted from service tax. According to the Service Tax Rules, a service qualifies to be considered as an Export of service if all the conditions given below are met:
- If the service is provided to a recipient outside India,
- And the service is provided from any location in India except J&K.
- In case the payment of the service is received in convertible foreign exchange.
- If the service is not a part of the negative list of the service tax act.
- If both the provider and recipient of service are not establishments of a distinct person.
Some of the important conditions have been elaborated below:
Negative List of Service Tax
All the activities which are not liable for the service tax are included in the negative list of service tax. For example, the services provided by the Reserve bank of India or any foreign diplomatic mission located in India.
Place of Provision of Services
Usually the location of the recipient, the place of provision plays a very important role while determining if the service tax on certain export of service is applicable or not.
Payment in Convertible Foreign Exchange
Any service is considered to be an export of service if the payment is received in convertible foreign exchange. An evidence of receipt of the payment in convertible foreign exchange may have to be produced to claim the benefits.
Not Merely Establishments of a Distinct Person
In some cases, a person owns one establishment in some taxable territory and another in a non-taxable one. In such cases, the services provided by the establishment will not be treated as export of service.
The Service Export from India Scheme
As per the Service Exports from India Scheme, all the services exported from India are eligible for reward of duty credit scrips. Which means that along with exemption of service tax, the exporters are eligible for upto 5% duty credit scrip under the Scheme.
Find out all about Service tax and Export of Services.
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