Microsoft’s Indian subsidiary provided services to Microsoft Operation Private Limited in Singapore to market products in India. The company treated the services as an export for tax purposes and therefore deemed them to be tax exempt, but the commissioner of service tax rejected the taxpayer’s claim for the period of April 19 2006 to December 31 2007, ruling that the marketing services had been rendered inside the country and thus were not an export for taxation purposes.
Microsoft appealed against the decision. The Delhi Cestat noted that services were provided to the overseas entity, and not directly to any Indian party and payment was sourced from the overseas entity. The services, therefore, were delivered outside of India and qualified as an export of service.The decision was left to the third member of the Cestat after a difference of opinion between the first two. The determination of what services qualify as exports will be a consideration during India’s eventual implementation of Goods and Services Tax (GST).
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