Service provided by a non-resident or a person located outside India, to a recipient in India taxable w.e.f 18.04.2006 – Stand accepted by CBEC

Pursuant to issuance of Notifications No. 21/2011-Central Excise (NT) & 22/2011-Central Excise (NT) both dated 14.09.2011 and Notification No. 43/2011 ST dated 25.08.2011 prescribing mandatory electronic filing of Central Excise and Service Tax returns, the DG (Systems) has issued comprehensive instructions outlining the procedure for electronic filing of Central Excise duty and Service Tax returns and electronic payment of taxes under ACES.

Service provided by a non-resident or a person located outside India, to a recipient in India taxable w.e.f 18.04.2006 – Stand accepted by CBEC

CBEC has issued an instruction clarifying that service tax liability on any taxable service provided by a non-resident or a person located outside India, to a recipient in India, would arise w.e.f. 18.4.2006, i.e., the date of enactment of section 66A -‘Charge of Service Tax on Services received from outside India’ of the Finance Act, 1994.

Accordingly, instruction F No. 275/7/2010-CX8A, dated 30.6.2010, wherein the Board had communicated its view that service tax on a taxable service received in India, when provided by a non-resident/person located outside India, would be applicable on reverse charge basis with effect from 1.1.2005, stands rescinded.  The instruction was issued by the Board even though the Mumbai High Court in the case of M/s Indian National Shipowners Association (INSA) held that service tax shall not be levied on the recipient of a service in India for the services provided by a non-resident or from a person located outside India for the period 1.03.2002 till 17.04.2006.

In response to the judgment of INSA, the Department had filed an appeal before the Hon'ble Supreme Court, for defending the levy of service tax on such services w.e.f. 1.1.2005.  However, the departmental appeal has been dismissed by the Hon'ble Supreme Court in the following recent judgements:

(i) SLP (C ) No . 29539 of 2010 in CCE Vs Bhandari Hosiery Exports Ltd.

(ii) SLP (C )No . 18160 of 2010 in CST Vs Unitech Ltd.

(iii) SLP (C) No. 34208/09 of 2010 in UOI Vs S R Batliboi & Co.

(iv) SLP (C)No. 328/332 of 2011 in UOI Vs Ernst & Young

(v) SLP (C) No. 25687-25688/2011 in CCE Vs Needle Industries

(vi) SLP (C) No. 25689-25690/2011 in UOI Vs SKM Engg Products

[CBEC Instruction F. No. 276/8/2009 CX8A dated 26.09.2011]

Source: www.taxindiaonline.com and www.cbec.gov.in