We sell newspaper subscriptions in India for our clients abroad. Our clients pay us commission in foreign currency. Please let me know if we are liable for service tax. This year we have already recorded revenues of around Rs 7 lakh until now. Will we have to pay service tax after we cross revenues of Rs 10 lakh, or is there no such requirement?
The service you provide is that of an intermediary. Rule 2(f) of Place of Provision of Services Rules, 2012 defines “intermediary” as a broker, an agent or any other person, by whatever name called, who arranges or facilitates a provision of a service (hereinafter called the “main” service) or a supply of goods, between two or more persons, but does not include a person who provides the main service or supplies the goods on his account. As per Rule 9(c) of the same Rules, the place of provision of intermediary services shall be the location of the service provider. Since you are located in India, your services are provided in the taxable territory and the services you render are not in the negative list nor exempted, you have to discharge the tax liability. You have to start paying tax after you cross the threshold limit of Rs 10 lakh.
As per FTP 2015-20, para 3.06 (vi), SEZ / EOU / EHTP / BPT / FTWZ products exported through DTA units are not eligible for MEIS benefits. My query is, can SEZ/EOU be a merchant exporter and if so, will such merchant exporter SEZ/EOU be eligible for MEIS benefits?
Trading units are not allowed under the EOU scheme, as mentioned in Para 6.00 (a) of the FTP. MEIS is not available for exports made by units in FTWZ as mentioned in Para 3.06 (xix) of FTP. There is no bar on other trading units in SEZ claiming MEIS, but supplies made from DTA units to SEZ units are not eligible for MEIS, as mentioned in Para 3.06 (ii) of FTP.
We would like to make payment in foreign exchange as a percentage of the business brought in by our agent who markets our services in Europe. What is the liability of service tax or withholding tax on this payment?
The service provided by your marketing agent is that of an intermediary and, as explained above, the place of provision of intermediary services shall be the location of the service provider. Since your agent is located outside India, his services are provided in non-taxable territory and hence not chargeable to service tax. Income accruing for services provided outside India by a non-resident is not taxable in India and so there is no question of TDS.
Correction
There was a mistake in the headline of the SME Chatroom article that appeared in the Business Standard edition dated December 13, 2016. The headline should have read, “If provider and receiver of service are both in India, service is taxable”. The error is regretted.
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