India

Services rendered by FASPL to Foreign Companies classifiable under BSS, Tax Not leviable as it is Export of Service: CESTAT [Read Order]

Posted on by Minakshi




CESTAT Ruling: Key Tax Relief for Indian Service Exporters Serving Foreign Businesses



CESTAT Ruling: Key Tax Relief for Indian Service Exporters Serving Foreign Businesses

In a significant development for Indian businesses providing services to foreign companies, the Customs, Excise, and Service Tax Appellate Tribunal (CESTAT) has issued a ruling with major tax implications. The case revolved around the classification of services rendered by FASPL to foreign entities and whether these services qualify as “Business Support Services” (BSS) and, consequently, as exports.

The Core Issue: Classifying Services as BSS and Export of Service

The central question before CESTAT was whether the support services offered by FASPL to its foreign clients should be classified under BSS. If deemed BSS, the services could qualify as ‘export of service’ and be exempt from certain taxes.

Understanding Business Support Services (BSS)

According to the ruling, the definition of “support services of business or commerce” specifically includes activities like:

  • Evaluation of prospective customers for foreign clients.
  • Telemarketing initiatives.
  • Processing of purchase orders on behalf of foreign entities.

These activities, when performed for foreign companies and meeting the criteria for export, can be considered BSS.

The Impact: No Tax Levied on Export of Service

The CESTAT’s order clarifies that when services provided by Indian companies like FASPL meet the criteria for BSS and are, in essence, exports of service, they are not subject to certain taxes. This ruling offers significant relief to Indian companies engaged in providing such support services globally. This decision emphasizes the importance of understanding the specific nature of the services provided to ensure proper classification and tax treatment.

Summary:

  • CESTAT has ruled on the classification of services provided by FASPL to foreign companies.
  • The ruling focuses on whether these services fall under “Business Support Services” (BSS).
  • If classified as BSS and ‘export of service’, the services are not subject to certain taxes, offering tax relief.
Key Takeaways:

  • Indian companies providing support services to foreign businesses may be eligible for tax benefits.
  • The definition of “support services of business or commerce” includes a wide range of activities, such as telemarketing and processing orders.
  • Proper classification of services is crucial for determining tax liabilities and claiming exemptions.
  • This ruling provides clarity on the tax treatment of BSS and encourages Indian companies to expand their export operations.