25 November 2009
Indian company has agreement with foreign entity for architect servies. A part from architect fees, Indian company will also reimburse travel expenses to foreign entity. No actual supporting are to be produced by foreign company but it is part of architect agreement. However seperate invoice is given for travel expenses. Please advice whether service tax will applicable on travel expense as import of services?
25 November 2009
If the architects fees relates to property in India Service Tax is applicable even if the service is performed wholly abroad.
Your question is not giving all the facts to arrive at a conclusive answer. Now if the reimbursements to the architect are not as a pure agent, they form part of his fees.
If you reimburse any amount to a pure agent abroad, if the amount is reimbursed for a particular expense and service tax is applicable for that expense in India, even though the service is rendered and used abroad, if it is for a business in India you have to bear the Service Tax on RCM basis. Say your architect charges for car rental and you reimburse him and account it in your business, you have to pay service tax on it.
To sum up, if you are making any reimbursement that do not form part of the Architect Fees, if service tax is applicable in India you pay Service Tax.
26 November 2009
Travel expenes paid to foreign entity is part of architect agreement. We can say it is not pure reimusement, profit margin is also added on travel expenses. Please let me know if you require more details.
26 November 2009
It is part and parcel of the fees and the entire amount paid will be taxable as Fees Paid to Architect. It is better you allow the whole remittance be an architects fee if you are able to satisfy no TDS of Income Tax on the fees on account of DTAA (in your other post). What will happen then is your Architects Fee is taxable only if it relates to property in India and you will be discharging the liability only under one head. If you create multiple heads, you will have to discharge liability of service tax separately for each head and there are chances that some of those expenses may be taxable merely because you are charging it to your P&L A/C even if the property is not situate in India. However this is only assuming that it is service as an Architect as per 105 (p) of service tax. If the Architect is rendering any other service, you will have to discharge that liability with a separate registration and the applicability will be as per import of Service Rules for that particular service only.
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