Subcontracted service liable to tax
Q. I do subcontracted medical transcription work for a company based in India, which in turn exports this service to the US clients, that is, the ultimate user of the service is a US clinic or hospital. As a subcontractor, do I need to collect service tax or is it exempted? If I need to charge service tax, then can the primary provider who subcontracts work to me get the refund since he exports the service?
A. The services of medical transcription centre are taxable under Business Auxillary Services category. Vide notification no.8/2003-ST dated June 20, 2003, these services were exempted from tax, but vide notification no. 2/2006-ST dated March 1, 2006, notification no.8/2003 was rescinded and hence from March 1, 2006, these services are liable to tax. Since you are providing the services to a customer in India and as you pointed out that you are a sub contractor you will be required to charge service tax to the client who is based in India. As for you, the client is in India to who you are providing the services and your services cannot be classified as export of service as you are going to receive the payment in Indian currency and the customer is also based in India. As regards to the primary service provider, his services will be considered as export of services if the following conditions are satisfied:
1. Provision of service must be to a recipient located outside India and
2. Payment for such service is received by the service provider in convertible foreign exchange.
Since the refund of service tax is restricted to those services that are mentioned in Notification No.17/2009-St dated 07/07/2009 and the services of transcription work doesn't fall under the services that are mentioned in the notification, the primary service provider will not be able to claim refund of the service tax paid to you.
Q. I do subcontracted medical transcription work for a company based in India, which in turn exports this service to the US clients, that is, the ultimate user of the service is a US clinic or hospital. As a subcontractor, do I need to collect service tax or is it exempted? If I need to charge service tax, then can the primary provider who subcontracts work to me get the refund since he exports the service?
A. The services of medical transcription centre are taxable under Business Auxillary Services category. Vide notification no.8/2003-ST dated June 20, 2003, these services were exempted from tax, but vide notification no. 2/2006-ST dated March 1, 2006, notification no.8/2003 was rescinded and hence from March 1, 2006, these services are liable to tax. Since you are providing the services to a customer in India and as you pointed out that you are a sub contractor you will be required to charge service tax to the client who is based in India. As for you, the client is in India to who you are providing the services and your services cannot be classified as export of service as you are going to receive the payment in Indian currency and the customer is also based in India. As regards to the primary service provider, his services will be considered as export of services if the following conditions are satisfied:
1. Provision of service must be to a recipient located outside India and
2. Payment for such service is received by the service provider in convertible foreign exchange.
Since the refund of service tax is restricted to those services that are mentioned in Notification No.17/2009-St dated 07/07/2009 and the services of transcription work doesn't fall under the services that are mentioned in the notification, the primary service provider will not be able to claim refund of the service tax paid to you.
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