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Has service tax been applicable to web development company?
09-May-2023 (In Startup Law)
Hello, I am a Freelancer/sole proprietorship company which dealing software/web development to foreign clients. We located in India but providing service outside of the India. I heard that Service tax is not applicable if gross revenue is less than 10 Lacs in a year. Also, location of customer determines service tax applicability. If customer is outside India, service tax is not applicable. So as service tax applies only to services sold within India; exports are, therefore, exempt from this registration. Therefore, if you're billing a US-based client for, say, web development work, you don't need to add service tax. Is that true?
It's true that you are not required to pay service tax if your net revenue is less than 10 lakh rupees a year but since you are providing the service from India so you have to bill your USA based clients for the service tax.
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Adv. Pulkit Prakash
Delhi | 400+ Answers
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Well this will require detailed research on service tax regulations and various notifications. However, if service is not deemed to be export, the tax will still be applicable. Would require more details to advise.
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Adv. Joydeep Nath
Delhi | 100+ Answers
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As per Section 66 D of the Finance Act, 1994, 'there shall be levied a tax (hereinafter referred to as the service tax) 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. As per rule 3 of the Place of Provision of Services Rules, 2012, 'the place of provision of a service shall be the location of the recipient of service'. Your service does not fall in any of the Rules 4 to 11 of the said Rules or in the negative list of services or in the list of services covered by any exemption notification. In your case, the service recipient is located abroad and so, the place of provision of service is a non-taxable territory. Therefore, you need not pay service tax on such services.
Having not crossed the 10 lac limit you are exempted as of now
Having not crossed the 10 lac limit you are exempted as of now
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Advoacte Amit Kumar Singh
Delhi | 25+ Answers
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