I run an consultancy offering distance courses of foreign institutions in Management ( I have the master franchisee for Asia nd Africa ) the students enrol through my sub franchisee located in India and abroad. the sub franchisee send me the fees against which I send them the study material, exam papers etc. the sub franchisee and the stduents are located in India and abroad. My TO is above 50 lacs. DO I PAY SERVICE TAX FOR THE RECEIPTS FROM MY FOREIGN sub franchisee also ( they never come to India and send the fees through bank transfer, I send the study material through courier)
Solution
Under section 65(105)(zze) of the Finance Act 1994 ,FRANCHISE SERVICES are fully taxable , and In your case your are franchisor and providing services with the help of sub- franchisee , in this case , there is no difference , so , you have to pay service tax on the gross amount which you have received from your sub franchisee with new rates because
" Service tax is payable on the gross amount charged by the franchisor from the Franchisee in relation to Franchise " See the Notification No. 7/2003 at here "
Moreover , I want to tell you that any service which is provided by Indians to foreign clients are also comes under the service tax provision and even IIM and IIT are paying service tax on the fees which they get from foreign students .
