Service Tax Export of Services

In most cases, outsourcing or export services are outside the purview of Service Tax as normally the services are provided to a foreign client (located outside India). These services fall within the scope of provisions of service tax for export services subject to some conditions.

As per Rule 6A of Service Tax Rules, 1994, the provision of any service provided or agreed to be provided shall be treated as export of service when, -

(a) The provider of service is located in the taxable territory,

(b) The recipient of the service is located outside India,

(c) The service is not a service specified in the section 66D of the Act (Negative List),

(d) The place of provision of the service is outside India,

(e) The payment for such services has been received by the provider of service in convertible foreign exchange, and

(f) The provider of service and recipient of service are not merely establishments of a distinct person in accordance with item (b) of Explanation 3 of clause (44) of section 65B of the Act.

Section 66C of the Service Tax Act provides for determination of place of provision of service. As per Sec 66C:

(1)    The Central Government may, having regard to the nature and description of various  services, by rules made in this regard, determine the place where such services are provided or deemed to have been provided or agreed to be provided or deemed to have been agreed to be provided.

 (2) Any rule made under sub-section (1) shall not be invalid merely on the ground that either the service provider or the service receiver or both are located at a place being outside the taxable territory.

Rule 3 of PLACE OF PROVISION OF SERVICES RULES, 2012 [28/2012-Service Tax dated 20.06.2012] provides that 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.

It is clear from the above Rule 3 that place of provision of the service is outside India if the location of the recipient of service is outside India.

To summarise the main points, the provision of any service provided shall be treated as export of services when, -

(a) The provider of service is located in the taxable territory (India),

(b) The recipient of the service is located outside India,

(c) The service is not a service specified in the section 66D of the Act (Negative List),

(d) The place of provision of the service is outside India (Location of the recipient in most cases),

(e) The payment for such services has been received by the provider of service in convertible foreign exchange.

Check out our other articles related to Service Tax

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OnlineITreturn.com is an online portal for efiling your income tax return. We collect your information for income tax return filing over our website www.onlineITreturn.com. Thereafter the information for each individual is reviewed by our team of chartered accountants (CA) who prepares the tax computation. We then efile your income tax return using approved e-intermediaries.

Tax Audit Requirement – Sec 44AB

Audit of Books of Accounts is mandatory under Income Tax Act, 1961 for eligible business/ profession. This is commonly referred to as Mandatory Tax Audit u/s 44AB of IT Act. To summarise the main provisions of mandatory tax audit (tax audit requirement) under Sec 44AB, an assessee is liable to get his Tax Audit done by a Chartered Accountant, if in the previous year, the person is carrying on business and his total sales/turnover exceeds Rs. 1 crore or the person is carrying on a profession, and his gross receipts exceed Rs. 25 Lakhs. (Please refer to our earlier article on Tax Audit for details).

Tax Audit Requirement Reports

As per Rule 6G of Income Tax Rules 1962, tax audit report is to be furnished in Form 3CA & Form 3CB and the particulars which are required to be furnished under section 44AB should be in Form 3CD.

  • In the case of a person who carries on business or profession and who is required by or under any other law to get his accounts audited, the tax audit report shall be in Form 3CA &particulars in Form 3CD
  • In the case of a person who carries on business or profession, but not being a person referred to in clause (a), the tax audit report shall be in Form 3CB &particulars in Form 3CD

Due Date for filing Tax Audit Report

The due date for filing Tax audit requirement report is 30th September of the Assessment Year in the case of company, any other person and for a working partner of a firm. This date has been specified in the Explanation to section 44AB to be the due date for furnishing return of income under section 139 (1).

However, the due date for obtaining and furnishing of the report of audit under section 44AB of the Act for Assessment Year 2014-15 in case of assessees who are not required to furnish report under section 92E of the Act has been extended from 30th September, 2014 to 30th November, 2014 by CBDT vide order u/s 119 dated 20/08/2014.

Mode of filing Tax Audit Report

As per Notification No. 34 dated 1st May 2013, Tax Audit report under Section 44AB shall be furnished electronically from 01st April 2013.

Penalty for not getting accounts audited or for not filing Tax Audit Report u/s 44AB – Section 271B

The amount of penalty for non-compliance with tax audit requirement u/s Section 44AB shall be half a percent of turnover / gross receipts or Rs. 1,50,000 whichever is lower. However Sec 273B states that no penalty may be levied if there is a reasonable cause for such failure.

Can a Tax Audit Report be revised?

Tax Audit Report should not normally be revised. In case of revision, the audit report should be given in the manner suggested by the Institute in SA-560 (Revised) “Subsequent Events”.

However, a Tax Audit Report may be revised on following grounds:

  • Revision of accounts of a company after its adoption in annual general meeting.
  • Change of law e.g., retrospective amendment.
  • Change in interpretation, e.g. CBDT’s circular, judgments, etc.
  • Any other reason like system/software error requiring change in report already uploaded.

 

In case a Tax Audit report is revised, then it must be mentioned in the revised report that the said report is a revised report and a reference should be made to the earlier report also. In the revised report, reasons for revising the report should also be mentioned.

 

The e-filing portal allows uploading and efiling of such Revised Audit Report by the CA for the same PAN and Assessment Year.

 

Changes in Tax Audit Report

 

Several changes in Tax Audit Report have been introduced vide Income Tax (7th amendment) Rules 2014 which are applicable from this AY 2014-15 onwards. This will be covered in a separate article.

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