Circulars/Trade Notices/Clarification
Circular

EXPORT OF SERVICES-DRAFT PROPOSALS

The issue of export of services in the context of service tax has been under consideration of the Government. It may be recalled that before 1-3-2003, all those services for which payment was received in convertible foreign exchange were exempt from service tax vide notification No.6/99-ST dated 9-4-99. Consequent to the withdrawal of this exemption, a circular clarifying certain issues in regard to the export of services and the taxability thereof was issued. As trade and industry has represented that there is certain lack of clarity in the said circular, exemption for services for which payment was received in convertible foreign exchange has been restored vide notification No. 21/2003-ST dated 20-11-2003, as an interim measure.

It has been recognized that unlike the case of goods, in case of services it is difficult to give a precise definition of ìexport of servicesî. Accordingly it has been considered more appropriate to prescribe a set of criteria to decide when a service is deemed to have been exported, keeping in view the nature of the different taxable services. The proposals in this regard are given below. While formulating these proposals, the best international practices have been kept in view. Before taking a final view on this issue, comments and suggestions on the proposals are invited from the trade and industry. These may kindly be sent on or before 25-12-2003 on any of the following

e-mail addresses: gtmray@finance.nic.in, geebee_audit@rediffmail.com, arahman@finance.nic.in.

Proposals:

1. Taxable services shall be deemed to have been exported if ,-

    (A) for the following services, the service is physically carried out, partly or wholly, outside India:

1 Clearing & Forwarding agents
2 Custom House Agents
3 Steamer Agents
4 Authorised service station for motor vehicles
5 Beauty Parlours
6 Cable Operators
7 Cargo handling service
8 Commissioning and installation
10 Convention service
11 Dry cleaning services
12 Event management
13 Health Club and Fitness Centres
14 Internet cafÈ
15 Port services
16 Repair and maintenance
17 Security/Detective agency
18 Storage and warehousing
19 Tour operator

(B)   for the following services which relate to some immoveable property, the said immoveable         property is located outside India:

1. Real estate consultancy
2. Architect
3. Interior decorators
4. Mandap Keepers

(C)   for the following services, the recipient of the service is located outside India:

1 Stock brokers
2 General Insurance
3 Insurance auxiliary service
4 Insurance auxiliary services relating to life insurance
5 Banking and other financial services
6 Credit rating agency
7 Underwriting services
8 Business auxiliary service
9 Franchise service
10 Fashion Designers
11 Rent-a-cab operators
12 Photography service
13 Sound recording service
14 Video tape production service
15 Technical inspection and certification
16 Technical testing and analysis
17 Air Travel Agent
18 Rail travel agent
19 Telegraph service
20 Manpower Recruitment agency
21 Market research agency
22 Advertising agency
23 Chartered Accountant
24 Company Secretary
25 Cost Accountant
26 Management Consultancy
27 Scientific and technical consultancy
28
29 Telephone
30 Telex service
31 Leased circuits
32 Pager
33 Facsimile service
34 On-line information and database access and/or retrieval services
35 Broadcasting service
36 Commercial training and coaching service
37 Consulting engineers
38 Courier agency


Note 1: However, in case of the 38 services mentioned above, if the service is utilized by an individual in his personal capacity during his stay in India, the same shall not be deemed to be export of service.

Note 2: The location of the recipient here means the location of the business establishment to which the service is supplied and in case the recipient is an individual it shall be his permanent address or usual place of residence. Business establishment here shall include branch office/division etc.

2.           Service tax shall not be payable on services exported in terms of the criteria mentioned above.

3.           The credit of service tax paid on input services used in providing an output service which is exported, will be refunded if it can not be utilized for payment of tax in India.

                                                  
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