I am being retained as an advisor or consultant by a company in Finland for an initial period of three years. For this retainership I will be paid certain fixed yearly fees and reimbursement of actual costs related to travel, etc. from Finland, through banking channels. My assignment will be to guide them for activities in India where they have certain interests. Am I required to charge service tax? What are the income tax implications?
Your service is treated as export of services, as you meet the requirements under Rule 6A of Service Tax Rules 1994. As per Rule 3 of the Place of Provision of Services Rules, 2012, the Place of Provision of Services is Finland, the place where the service receiver is located. As per Section 66B of the Finance Act, 1994, service tax is leviable on services provided in the taxable territory, which covers India, except J&K. So, you need not charge service tax, as the recipient of the service is located outside India (in a non-taxable territory) and you will receive foreign exchange for your services. Your income is taxable as per Indian laws, as you are resident in India and the income accrues in India.
RBI says that for write-off of export proceeds, proportionate export incentives must be surrendered. What all should I consider as 'export incentives', in this context and for my SEZ unit?
I am not aware of any RBI explanation on what all incentives must be surrendered. The usual practice of banks is to take an undertaking/declaration regarding surrender of proportionate incentives and allow write-off. In my opinion, you must surrender proportionate duty drawback and duty exemptions/duty credits under Chapter 4 and 3 of the Foreign Trade Policy. As a SEZ unit, you must surrender customs duty on inputs proportionate to the shortfall. I am sure a clarification from RBI or the commerce ministry will help all exporters.
As an EOU, can we count exports through a third party, where foreign exchange is realised by the merchant exporter, towards our entitlement for DTA sales?
As per para 6.19(d) of Handbook, fulfilment of NFE by exports of EOUs through a third party shall be reckoned on the basis of the price at which the goods are supplied by EOUs to merchant exporters, provided the goods move directly from the EOU to the port and the shipping bill mentions the name of the merchant exporter and also the name of the EOU as manufacturer. As per Policy Circular No.19 (RE-2006)/2004-2009 dated 11.09.2006, you can count such exports through a third party for your DTA sale entitlement on the basis of the price at which you supplied the goods to the third party.
Are we required to pay service tax and deduct TDS when remitting commission on exported goods, beyond exemption limit to our Japanese agent?
As receiver of a service and located in India, you have to pay service tax. You need not deduct TDS, because the income has accrued in Japan to a resident of that country.
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