No service tax on property shows abroad

CHATROOM

If the recipient of the service is in India and the provider abroad, tax provisions apply.

We are an SSI unit having clearance value below Rs 4 crore and opting to pay full excise duty from the first clearance and availing Cenvat on input.

We have been submitting quarterly returns in ER-3 and depositing duty by the 15th of every subsequent month. The department is asking us to deposit the same in ER-1 on a monthly basis and the duty by the 5th of every subsequent month.

They are also asking us to show-cause since April 05-06 i.e. when the facility of payment of 60 per cent of full rate of duty (9.6 per cent ad valorem) up to the clearance value of Rs 1 crore was withdrawn. While we have started depositing monthly returns now, please advise position for 2005-06 and 2006-07.

Rule 8 of the Central Excise Rules, 2002, effective from March 1, 2002, continued the concept of fortnightly payment of duty as set out in the Rule 173G.

However, vide notification no. 12/2003-CE (NT) dated March 1, 2003, the Rule of fortnightly payment was substituted by payment of duty on a monthly basis, i.e., the assessee can pay the duty before the 5th of the following month in which the goods are removed, except or the month of March, when the duty liability has to be discharged by the end of the month.

In the case of the assessee availing the exemption under a notification based on the value of clearance in a financial year, the duty on goods cleared during the month shall be payable by the 15th of the following month, except or the month of March, when the duty liability has to be discharged by the month-end.

This position remained the same for 2005-06 as well as 2006-07.

If a property show is organised abroad where all the expenditures are also incurred, but the money collected from Indian builders in India, will the stall expenses for the show abroad be subject to service tax? Please clarify, as I am getting contradictory opinions from experts.

Section 65 (19a) of the Finance Act, 1994, defines business exhibition service and Section 65 (105) (zzo) covers services provided to an exhibitor, by the organiser of a business exhibition, in relation to a business exhibition.

According to Section 66 A, when any taxable service is provided by a person who is established abroad to a person in India, such service shall be treated as if the recipient had himself provided the service in India and, accordingly, all the provisions of this chapter shall apply.

This Section has to be read with the Taxation of Services (Provided from Outside India and Received in India) Rules, 2006. The service in question falls under Rule 3(ii) of the said Rules, which mandates performance in India, at least partly, to be considered as services provided from outside India and received in India.

Quite obviously, in your case the service is not performed in India at all and so, in my opinion, you need not pay service tax on expenses incurred for stall expenses abroad.

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