The Government has decided to make rules regarding export of services. These would form part of the existing service tax rules. It has been decided to make the draft rules available to the trade and industry with a view to invite suggestions and comments on the same. The draft rules are available on Finance Ministry website finmin.nic.in, www.cbec.gov.in. Trade and industry are requested to give their valuable suggestions on or before 26-8-2004 on any of the following e-mail addresses: [email protected], [email protected]., [email protected].
At present there are no legislative provisions defining export of services. Though all taxable services for which payments are received in convertible foreign exchange are exempt from service tax, it has been a long-standing demand of the trade that suitable provisions should be framed in regard to export of services.
In budget 2004, suitable amendment has been proposed in the Finance (No.2) Bill, 2004, to enable Government to make rules for defining export of taxable service, and providing exemption to such exports and rebate of tax paid or payable on exported taxable services and their inputs. To give effect to this proposal, Government has come out with the draft rules pertaining to export of services.
The salient features of these rules are as follows:
Any service provided in relation to export of goods shall be treated as export;
Specified services pertaining to immoveable property are to be treated as export, if the said immoveable property is located outside India.
In case of specified services, which involve a physical activity, if the service is performed outside India it shall be treated as export. To avoid disputes and for the sake of simplicity, even if such a service is partly performed outside India, it shall be treated as export of service;
Other services rendered to an industrial or commercial user, located outside India shall be treated as export unless it has any establishment or office in India. Services rendered to non-industrial or non-commercial users would be treated as export, if the recipient is located outside India at the time service is received;
Taxable services can be exported without payment of service tax. Alternatively, taxable services can also be exported on payment of service tax and later on, rebate of the tax paid may be claimed;
Rebate of service tax or excise duty paid on inputs used in providing taxable services exported shall also be available.