We are an Indian agency that has a contract with a Singapore-based pharmaceutical company for clinical testing of drugs that it manufactures. The drug samples sent to us after being tested are returned to the Singaporean company along with the test report. We would like to know if service tax is leviable on the remuneration that we receive in Singapore dollars for the testing service where the report is sent outside India.

The testing service is taxable under the category of ?Technical testing and analysis service? and the same would be outside the purview of service tax if it qualifies as export under the Export of Service Rules 2005. The conditions specified for testing service to qualify as exports is that such service?is provided from India and used outside India. The payment is received in convertible foreign exchange and such service is partly or wholly performed outside India. The testing service that you provide is entirely performed within India and delivery of the report in this regard is not relevant. Therefore, as your service is performed entirely in India it would not qualify as export and the same would attract service tax.

We are a manufacturing company that produces consumer durables. We import certain components and hire the services of a goods transporter to carry them from the dock to our factory. The transporter raises a composite bill for delivery of the materials to our factory as well as for its return journey. We understand that having received the goods transport agency?s service we are liable to pay service tax on the freight charged. However, since the truck returns empty, we are unsure as to whether we need to pay service tax on the entire bill raised by the transporter. Please advice.

The service tax law has specified that the liability to pay service tax in case of transport of goods by road be on the recipient of service for specified category of persons. If the transporter bills you a gross amount for inward as well as outward journey when it returns empty, you have no option but to pay service tax on the entire value of the bill. The possible alternative in such case is that you may revise the arrangement with your transporter and request the company to charge separate values for the inward and outward journey of the truck. In such case, you could pay service tax only on the freight charges for the transport of goods into the factory and not on the charges for the returning empty trucks.

We are a courier agency in India and undertake door-to-door delivery of documents and articles for our clients in India who pay us in Indian rupees. Kindly advice if we are liable to pay service tax on the payment received from our clients in India for delivery of documents abroad.

The courier service provided to your clients in India is taxable under ?Courier service?. Such service would qualify as export under the Export of Service Rules, 2005 if such service is?partly or wholly performed outside India; provided from India and used outside India and the payment is received in convertible foreign exchange. It is clear that your clients are located in India and therefore ?use? of the service outside India does not arise. Also, the payment is received from clients in Indian currency and hence, the courier service provided by you does not fulfill the conditions to qualify as export even though the service is performed partly outside India. Therefore, you will be liable to pay service tax for the courier services provided to clients in India.

We are a reputed mobile phone company with a large database of customers across our locations in India. Banks and various other organisations require the name, address and telephone numbers of customers compiled in our database. We compile the data that customers require and mail it in parcels that are sealed and addressed to such organisations at regular intervals. The total amount that we charge for such service is recove-red with service tax. Should we also charge service tax on the value of the parcels and stamps used for providing our services?

The data compiled and mailed by you to your clients is taxable under the category of ?Mailing list compilation and mailing service?. The gross amount charged by you for such service is exigible to service tax based on the Finance Act 1994 read with the Valuation Rules 2006, and the amount paid for the value of parcels and stamps cannot be excluded.

?Respondents are senior professionals at Ernst & Young. The replies do not constitute professional advice, but are based on interpretation of facts available in readers? queries to the professionals. Neither Ernst & Young nor this publication are liable for any action taken on the basis of this information