Pradeep Jain - Chartered Accountant

Query

(Avinash Jain) Posted On: 04 May, 2015

Hello Sir, I am CA - inter student and working in a corporate. I am stuck to 1 point on Service tax on online advertising w.e.f. 1st Oct, 2014 and income from Apps: Brief Facts - We are basically promoting our apps outside India through one of our vendor who is also located outside India i.e. non-taxable territory. - These Apps are advertised on different social media and targeted to a particular Country/Audience at one point of time. - These are the sort of online adds which pop-ups while one surfs online on the social media. - these services have been utilised in promoting our apps across the world through the social media in the form of advertisement. - Both the service recepient and service provider are outside India in Non-taxable territory. - In turn, We get amount in foreign currency in the form of income from Apps also on the basis of the no. of hits. Questions: 1. Amount paid to vendor for promoting our apps (Both service receiver and service provider located outside India) is chargeable to Service tax under reverse charge? Can we apply Rule 3 general rule becuase in this case place of service receiver is not available, then the location of service provider as per POPS which is located outside India and hence no liability under reverse charge of paying service tax. 2. Amount of income received on the basis of no. of hits from Google who has PE in India but we are receiving amount in forex i.e. in foreign convertible exchange. Are we liable to pay service tax or we should treat it as export of service income. Please help sir in clarifying the above two points please. Looking forward for your response.

Referring to your question no. 1, to the best of our understanding, the service provider is the vendor and you yourself are the service receiver. As explained by you that vendor is the service provider and the audience is the service receiver is principally incorrect. The reason being that vendor is actually providing you the services of advertisements and charging for the same. He has no interaction with the audience. Now as the advertisement services are no where mentioned specifically in the POPS rules, thus rule 3 will prevail and the location of service receiver will be the place of provision of service. As you are the service receiver, your location will be the place of provision of service and you shall be liable to pay the service tax under reverse charge mechanism. {Query replied by: - Monika Tak}

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