We are a leading management institute in Mumbai. We are organising a major event in which other management institutes both from within and outside India will participate. In order to garner funds for the event, we would have various sponsors. Do we have any service tax obligations? Please advice.

As per the service tax regulations, typically the service provider is liable to deposit service tax on taxable services. However, in the case of certain specified taxable services including sponsorship services, the service recipient is responsible to deposit service tax. From a description of your proposal, it appears that your event will have several sponsors. The liability to deposit service tax will be on the sponsors themselves if they are located in India. You should ideally inform your sponsors upfront that it would be their liability to deposit service tax on the sponsorship amount.

We are an Indian subsidiary of a major electrical equipment company. We had entered into a lease agreement with our landlord for our office premises in Gurgaon last year. As per the terms of the agreement, we are required to pay rentals on a quarterly basis by the seventh of the first month of the quarter. We understand that commercial leases became liable to service tax from June 1, 2007. We had paid our rent for the months of April, May and June 2007 on April 5 (without service tax.) Our landlord is seeking to recover service tax for the month of June 2007 though we had paid the rent when service tax on rentals was not applicable. We have agreed to reimburse the service-tax element in our rentals for the quarters beginning July 2007 onwards but are not willing to reimburse for the prior period. Kindly advice whether our stance is correct?

Service tax is generally applicable on the gross amount charged for taxable services. Also, under the current provisions, service tax must be deposited on any amount, including advances, received towards taxable services. Hence, your landlord would be liable to deposit service tax for the gross amount received towards taxable services?for commercial lease rentals for the period June 1, 2007 onwards. Although your company has paid the lease rental in advance, it is nevertheless a payment towards taxable services and is subject to service tax. It would depend upon your commercial arrangement with your landlord whether your company should reimburse service tax to the landlord.

We are a domestic airline company operating only in India. We have entered into an agreement with an overseas company in Singapore for maintenance and repair of the parts and accessories of our aircraft that are delivered to them for this purpose. We have been advised that the services received by us qualify as a taxable import of service and hence we are required to pay service tax on the same. Is this correct?

The maintenance and repair services of parts and accessories of your aircraft would be classifiable under the category of ?maintenance or repair services?. You would be liable to paying service tax being the recipient of service, only if the services fall within the scope of taxation of services?provided outside India and received in India, Rules, 2006. The specific condition for maintenance or repair services to come under the rules is that such services must be partly or wholly performed in India. It seems that the services of maintenance or repair are to be performed entirely outside India and therefore, such services will not fall under the aforesaid rules. Hence, your company may not be liable to pay service tax on the said services if they are entirely provided outside India.

We are a company engaged in software development as well as providing call center services outside India. We are availing input services like telephone, security, etc and being charged service tax on the same. We understand that we are eligible to claim refund of service tax paid on input services used in relation to export of call centre services. Kindly advice if we are eligible for service tax refund on export of software as well.

The Apex Court has judicially pronounced ?software? to be goods and software is liable to excise duty. Further, as per the Cenvat Credit Rules, 2004, where any input service is utilized in the manufacture of final product, and for any reason adjustment of the tax credit is not possible, the manufacturer is eligible for refund of the excess credit. It is arguable that, as you are engaged in development of software, which amounts to manufacture, you should be eligible to claim the service tax refund on the input services used towards development of software.

?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