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'Export
of Service' Rules notified
In
August 2004, the Government released the draft Export of Services
Rules ("Rules") which discussed situations when services
would be regarded as exported outside India, and be exempt from
service tax (read
our Hotline summarizing the draft rules). The Government has
now notified these rules, by way of Notification
No 9/2005 dated March 3, 2005. These Rules shall be effective
March 15, 2005. From that date, the existing exemption available
to services in respect of which consideration is received in convertible
foreign exchange will be withdrawn.
As
per the Rules, services taxable under the Finance Act, 1994 will
be exempt from service tax where the same are exported outside
India. In order to determine what constitutes export of services,
all the notified services have been bifurcated into 4 categories,
as under:
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Type
of services
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When
regarded as export of services
|
|
Services
architects, interior decorators, real estate agents and
construction services
|
|
Rendered
in respect of immovable property situated outside India
|
| A |
A |
A |
|
A
host of 44 services such as stock broking, underwriting,
credit rating, market research, technical inspection and
certification, commissioning and installation, etc.
|
|
If
performed either wholly or partly outside India
|
| A |
A |
A |
|
Balance
services which are used in or in relation to commerce or
industry such as intellectual property, scientific or technical
consultancy, business auxiliary services, etc.
|
|
If
the recipient of such services is located outside India.
However, if the recipient has a presence in India, services
will be regarded as exported only if:
-
Order
for provision of such service is made by the recipient
from outside India;
-
Services
are delivered outside India and used in business outside
India; and
-
Payment
in respect of such services is received in convertible
foreign exchange
|
| A |
A |
A |
| Balance
services when they are provided and used other than in or
in relation to commerce and industry |
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If
the recipient of the service is located outside India at
the time when such service is received.
|
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For
this purpose, India is defined to include the designated areas
in the Continental Shelf and Exclusive Economic Zone of India.
The Rules further provide that any service tax or duty paid on
any input services or inputs used in providing the services exported
would be available as a rebate subject to such conditions and
limitations and as per the procedure laid down in this respect.
Source:
Notification
No 9/2005 dated March 3, 2005
You
can direct your queries or comments to Daksha
Baxi and Shivani
Shah
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