| An interesting question was raised by one of the | | | | Thus it becomes extremely necessary to understand |
| learned reader of the Service Tax Review dated | | | | as to at what place services has been provided. If the |
| 15.08.2007 . The question which was put forward was | | | | services has been provided in a place where the |
| as follows , “Some of our members are exporting | | | | provisions of Service Tax extends, tax is payable |
| their products to different countries. There is a local | | | | otherwise tax is not payable. In case of commissions |
| agent in that country. Our members pay a settled | | | | agents, with respect to the export trade, the services |
| commission to them. Do we require to pay service tax | | | | are provided outside India. The agents provide services |
| on such commission paid?” The STR replied the | | | | to the person outside India. When services are |
| question in affirmative, saying that service tax is | | | | provided outside India, where the provision of service |
| leviable on such amount. This author begs to differ. | | | | tax doesn’t stand, no service tax is payable. |
| This paper is an attempt to clarify the position on the | | | | Section 66A reads as, “SECTION [66A. Charge of |
| issue. The foreign agents provide service to the | | | | service tax on services received from outside India. |
| exporters. However the services are provided outside | | | | — (1) Where any service specified in clause (105) of |
| India. They meet the prospective buyer outside India, | | | | section 65 is, — (a) provided or to be provided by a |
| they promote the products of the exporter outside | | | | person who has established a business or has a fixed |
| India. For Service Tax to be leviable and payable, the | | | | establishment from which the service is provided or to |
| services must be provided “in India”, except in | | | | be provided or has his permanent address or usual |
| the state of Jammu & Kashmir. When the services | | | | place of residence, in a country other than India, and (b) |
| are provided outside India, provisions of service tax is | | | | received by a person (hereinafter referred to as the |
| not applicable. Merely because the exporter is in India, | | | | recipient) who has his place of business, fixed |
| or payment is being made from India, service tax does | | | | establishment, permanent address or usual place of |
| not become leviable. Section 64(1) of the Finance Act, | | | | residence, in India, such service shall, for the purposes |
| 1994 reads as, “This Chapter extends to whole of | | | | of this section, be taxable service, and such taxable |
| India except the state of Jammu & Kashmir.” Thus | | | | service shall be treated as if the recipient had himself |
| the chapter of service tax does not extend to a place | | | | provided the service in India, and accordingly all the |
| outside India . While explaining the applicability of | | | | provisions of this Chapter shall apply :” The section |
| Service Tax in the state of Jammu & Kashmir, the | | | | is very clear in saying that in this particular |
| board explained , “The matter has been examined. | | | | circumstances, provision of this chapter (provisions of |
| At present the levy of service tax extends to the | | | | service tax) shall apply. The section is not levying a |
| whole of India except the State of Jammu and | | | | new tax. Section 66A merely shifts the burden of |
| Kashmir. The expression “India” includes the | | | | payment of service tax from the service provider to |
| territorial waters of India. Indian territorial waters extend | | | | service receiver in a particular circumstances. The |
| up to twelve nautical miles from the Indian land mass. | | | | burden must exist before it can be shifted. When there |
| Chapter V of the Finance Act which governs the levy | | | | is no burden of service tax, there is no question of |
| of Service Tax has not extended to the levy to | | | | shifting it on any other person. In Orient Craft Limited v. |
| designated areas in the Continental Shelf and the | | | | UOI , the Delhi High Court held that when the services |
| Exclusive Economic Zone of India (as has been done | | | | received outside India, service tax is not leviable. It is |
| in case of Central Excise vide Notification No. 166 | | | | leviable only when services are received in India. It said, |
| 87-C.E., dated 11-6-87 and in case of Customs by | | | | “4. The contention of the learned counsel for the |
| Notification Nos. 11/87-Cus., Dated 14-1-87 & 64/97-Cus., | | | | Petitioner based on the interpretation of Section 66A |
| dated 1-12-97). It is, therefore, clarified that the services | | | | of the Act, is that any Service that is obtained by a |
| provided beyond the territorial waters of India are not | | | | person who has a fixed place of business or fixed |
| liable to Service Tax as provisions of Service tax | | | | establishment or permanent address in India is liable to |
| have not been extended to such areas so far.” | | | | tax for services availed by him in a foreign country. By |
| This circular clearly accepts the position that if the | | | | way of an example, learned counsel for the Petitioner |
| Services are provided outside India, service tax is not | | | | has cited that if such a person in India goes abroad, |
| leviable. It is immaterial as to where is the person | | | | and has a hair cut, he would be liable to pay service |
| located, who is providing the service. What is relevant | | | | tax in India on the basis of Section 66A of the Act. 5. |
| is, “where the services are being provided”. The | | | | We are not at all convinced by this argument of |
| department has given following clarification in the | | | | learned counsel for the Petitioner. The Rules that have |
| frequently asked questions, “The service provided | | | | been framed by the Central Government make it |
| by a person having its business premises in the state | | | | absolutely clear that taxable service provided from |
| of Jammu & Kashmir, and providing taxable services | | | | outside India and received in India is liable to Service |
| to his clients in the other part of the country would be | | | | Tax. In the example given by the learned counsel for |
| liable for payment of service tax. A person having his | | | | the Petitioner, there is no question on the service of a |
| office in any of the other Indian states, who provides | | | | haircut having been received in India.” In view of |
| service to a person in the state of Jammu & Kashmir, | | | | these, it is absolutely clear that when services are not |
| would not be liable to pay the service tax.” This | | | | received in india, service tax is not payable. In this |
| view explained one thing, which must be understood. | | | | particular case, such services are not received in India, |
| This tax is not a tax on a person, or on a business | | | | and hence Service Tax is not payable. |
| establishment; but it is a tax on the services provided. | | | | |