Hi, I provide management and business consulting services to clients who are exclusively outside of India. As per my understanding, export of this service is exempt from service tax in India even though I make more than the threshold amount of 10 lacs per annum. So my question is: 1. Whether I have to even register for a Sales Tax number and file returns with 0 sales tax or can I just not register at all? 2. If I don't have to register, can I still deduct business related expenses to save income tax? Thank you for the responses! Regards, Gaurav
Dear Gaurav,
Yes, your services are eligible for export of services subject to the other conditions being satisfied such as receipt of payment in foreign currency.
You don't need to avail any registration and no need to pay service tax.
Yes you can deduct business related expenses.
Please feel free to call/revert in case of any doubts
Thanks and Regards
Abhishek Dugar
CA CS B.Com
Thanks for the quick reply Abhishek. You mentioned that receipts should be in foreign currency. Does that mean I have to get an FIRC for each payment ?? I normally get payments of 50K to 1lac per transaction via Paypal which coverts USD to INR before remitting funds. If I instead get the money via international wire transfer in USD, would I still need an FIRC?
Hi,
1. You are providing Service and not dealing in any Goods. So, there is no need for any Sales Tax registration. Even Export of Service is not liable for Service Tax. However, you are eligible to claim Refund of CENVAT Credit as per CENVAT Credit Rules. So, I suggest go for Service Tax registration and claim refund of Input Services used in rendering the Services.
2. Yes. You can claim all business expenses for the purpose of Income Tax
Yes. Getting an FIRC is advisable
- Sales TAX Number not required for service provision
- You can continue business and claim expenses under income tax regardless of any indirect tax registration
- If you have received payment in foreign currency through banking channel than FIRC is automatic whether you have received it form your banker or not and bank by default create it any you can take from it any point of time.
- If you get the fund from paypal , than only pay pal account in Dollar terms is sufficient proof and no FIRC required. The rule is to get fund in foreign currency and proof of such receipt, FIRC is not mandatory.
Thanks a lot Vishrut, great answer! One last thing, I am currently getting these FX payments in my various savings accounts. Should I get a current account opened instead? Is that a requirement for the things that you have said?
it is always better to get current account, since business payment can be easily identified and personal transaction not need to get justified in case of inquiry. Since in case of personal account, at the time of scrutiny you all need to justify personal entries along with business entries and may results into some trouble.
You can also alternatively work with current paypal option and transfer it to your personal account and do proper accounting of it to justify transaction at any later date.
Hello Sir,
I assume all your earlier queries are resolved.
For your last query, it is not necessary to open a Current Account. But, it will be preferred if you open a Current Account.
Trust this clarifies your query.
Feel free to call / get back in case of further clarifications.
Thanking You.
Regards,
Rohit R Sharma
BCOM, ACA, LLB-GEN, CERT. FAFP
Charging Section under Service Tax Law states
he Charging Section (section 66 B) of the Finance Act as amended in 2012 specifies that" there shall be levied a tax (hereinafter referred to as the ST) at the rate of twelve per cent on the value of all services,other than those services specified in the negative list,provided or agreed to be provided in the taxable territory by one person to another and collected in such manner as may be prescribed.”
The words ' agree to be provided in the taxable territory "-- as in your case service provided is outside india it is deemed to be outside the charging section purview
As a precaution one should take receipts in covertible foreign currency and should have complete address and proof of the recipient of service outside india(Service Tax Rules)
Hence no service tax and no registration required provided only exempt service is provided by you
