PAYMENTS
IN
FOREIGN EXCHANGE TO ATTRACT SERVICE TAX
The party has ended
for scores of service providers enjoying a service tax exemption
on payments received in foreign exchange. They will have to
start paying service tax from March 15.
The finance ministry
has finally defined what constitutes export of services. An
exemption from service tax will be given only where services
are actually exported. Broadly, export is defined based on
the location of the buyer. The recipient has to be outside
the country.
The move would
impact the tourism industry. Service tax will have to be paid
if, say, a foreign tourist rents a cab in India and pays in
foreign exchange. An exemption will be given only if the recipient
is outside India when such services are received, according
to the rules notified today.
Four services
- real estate consultancy, architecture, interior decoration
and construction - relating to immovable property will be
treated as export only if such property is located outside
India.
This means services
rendered by a real estate consultant for a property in, say,
London will be treated as export. General insurance services
will also be covered under this category if the property is
located outside India.
