Service tax is applicable on advance payment to companies

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We are a market research agency engaged in conducting corporate surveys. We have received advance payments in May 2008 in respect of a project where our work will commence only in August 2008. We would like to know when we would be required to pay service tax on such advance receipts, for services to be provided on a later date.

Service tax is levied on receipt of consideration for taxable services provided or to be provided. Accordingly, service tax becomes due for payment as soon as payments are received, irrespective of the time of actual rendering of services. Even if payments are received in advance for services yet to be provided, service tax becomes payable on the basis of the month of receipt of consideration. Therefore, you would be required to deposit service tax in respect of such advance payments received in May, latest by June 5, 2008. In case of e-payment of service tax, the due date would be June 6, 2008.

We are a company engaged in import of metal alloy products used in a variety of manufacturing activities. We intend to participate in an upcoming promotional fair organised by a trade organisation. For this, we need to import certain samples of our products for exhibition, which would be re-exported after the event is over. Is customs duty necessarily payable on such temporary imports for exhibition purposes?

The Government of India is a signatory to the international ATA Carnet convention, under which temporary import of goods into India for exhibition purposes is exempt from the payment of customs duty. The ATA Carnet is required to be guaranteed by the Federation of Indian Chambers of Commerce and Industry, which has been appointed by the government as the sole guarantor of ATA Carnet in India. The imported goods are required to be re-exported within six months from the date of import, unless they are sold in India upon payment of applicable customs duties. Further, the re-export would be required to be in terms of export regulations and compliance requirements under Indian customs laws, as applicable on your products. Accordingly, you may import goods for exhibition purposes without payment of any duty and re-export them under the ATA Carnet convention.