We are an Indian subsidiary of a foreign company and are engaged in providing taxable services to our parent company in the US. We have been informed that there have been changes in the service-tax law relating to the taxation of transactions between ‘associated enterprises’. Could you explain the impact of this concept? The term ‘associated enterprise’ in service tax has the same meaning as assigned to it in the income tax law. It is a relative concept—an enterprise is an associated enterprise when it is viewed in relation to other enterprises. This concept is used in income tax law for applying transfer pricing provisions. An enterprise which participates, directly or indirectly, or through one or more intermediaries, in the management or control or capital of the other enterprise is considered as an ‘associated enterprise’. The income tax law specifies various situations under which two enterprises are deemed to be associated enterprises. Service tax is to be deposited only upon receipt of payment. In case of a transaction between two ‘associated enterprises’, service tax on the taxable services provided is required to be deposited by the service provider even if the amount is not actually received, but the amount is credited or debited in the books of account of the service provider. In other words, service tax is required to be paid on crediting/debiting of the amount in the books of accounts or after receipt of payment, whichever is earlier, in case of transactions between associated enterprises. We are engaged in providing software maintenance services. In some cases the software resides on our client’s server located outside India. The services are performed in India by electronic means. Please advise whether such services are taxable in India. The repair and maintenance services provided by you would be liable to service tax under the taxable service category of ‘management, maintenance or repair service’. However, the same would not attract service tax and should qualify as ‘export’ if following conditions are satisfied: * Such services are performed wholly or partly outside India, and * Such services are provided from India and are used outside India, and * Consideration for such services are received by you in foreign exchange Since March 1, 2008, an amendment has been introduced to the service tax export rules in relation to the category of repair and maintenance, which provides that if the service is provided with respect to goods located outside India at the time. – www.yahoo.com