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Service tax on export of software

Today we discuss on the applicability of service tax on export of software. for applicability we have to check the definition of export in service tax. The taxable services, which are exported, are exempted from service tax.

Definition of Export of Service

According to the rule 6A of Service Tax Rules 1994 – (Export of Services), any service provided or agreed to be provided is considered as export of service subject to the following conditions:

Condition 1: Taxable Territory

The provider should be located in the taxable territory. Taxable territory means any place in India except the state of Jammu and Kashmir.

Condition 2: Location of the Recipient

The recipient who receives the services should be located outside India.

Condition 3: Negative List of Services

The provided or agreed to be provided services should not be listed in the Negative List of Services as per the section 66D of the Service Tax Act. No service tax is levied on services listed in the Negative List.

Condition 4: Place of Provision

Place of provision of service should be outside India. Place of provision is determined according to the Place of Provision of Services Rules, 2012 vide Notification No.25/2012-Service Tax dated 20th June 2012. Place of provision, in general, is the location of the recipient of service. Place of provision for software service is defined below.

Condition 5: Payment for the service

Payment for the service should be in convertible foreign exchange. The payment received by the service provider for such services should be in foreign currency that can be convertible for another currency.

Condition 6: Branch or Agency

If the service receiver is a branch or agency or representational office of the service provider, such service is not considered as export of service. For example, if ‘A’ is a service provider located in India, providing services to its branch office located in London, and then such services do not come under the definition of Export of Service.

If your service satisfied the condition than it will be covered in export of service and No service tax liability will come.

Place of Provision of Services Rules, 2012

Whether your service will fall in export of service or not will be find out by viewing  place of provision of service.

As per notification 28/2012-Service Tax dated 20.06.2012  Place of provision generally –

The place of provision of a service shall be the location of the recipient of service:Provided that in case the location of the service receiver is not available in the ordinary course of business, the place of provision shall be the location of the provider of service.

Place of provision of specified services.-

For Software place of provision of  service is specially define in the service tax as below –

The place of provision of following services shall be the location of the service provider for 

(a) Online information and database access or retrieval services;

Online information and database access or retrieval services” means providing data or information, retrievable or otherwise, to any person, in electronic form through a computer network;

 Definition of Software in Service tax

1 “development and supply of content” includes development and supply of mobile value added services, music, movie clips, ring tones, wall paper, mobile games, data, whether or not aggregated, information, news and animation films;]

2 “information technology software” means any representation of instructions, data, sound or image, including source code and object code, recorded in a machine readable form, and capable of being manipulated or providing interactivity to a user, by means of a computer or an automatic data processing machine or any other device or equipment;]

3 online information and database access or retrieval services” means providing data or information, retrievable or otherwise, to any person, in electronic form through a computer network;

Our Opinion

If you fall in 1 or 2 category then no service tax applicable but if you fall in 3 then service tax applicable.

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