31 December 2014
Dear Experts, I seek your valuable opinion on my query on import of services. It would great help if you can provide your valuable inputs. We are importer of industrial chemicals and do not provide any kind of service and paying service tax only under reverse charge mechanism for car rentals and GTA. Below services are imported and payment are made in foreign currency on period basis after deducting withholding tax wherever applicable.
1. IT Services. We are receiving IT services like (remote access services, Antivirus Server, SAP Services, Shared Infrastructure Costs, Internet Access content filtering services • Bill raised directly by Service Provider to us • Bill is in the name of service receiver (Indian Company) 2. Corporate Office USA: Bank Guarantee fees (Corporate bank guarantee issued by Corporate to Indian bank to avail credit facilities by us through in India) • Bill is raised by Corporate Office in our name • This is reimbursement of expenses charged by Corporate to Indian subsidiary with 5% mark up 3. Corporate Office USA: Trade Mark Fees (fees charged by corporate for using Trade Mark in India) Reimbursed to USA • Bill is raised by Corporate USA in the name of service receiver (Indian Company) • This is reimbursement of trade mark fees charged by Corporate to India subsidiary with 5% mark up
I seek your inputs as to whether service tax is applicable on any of the above services even if it is in the nature of reimbursement of expenses incurred by foreign corporate on behalf if Indian subsidiary. Kindly quote relevant sections/rule for my better understanding. Your valuable inputs are highly awaited and appreciated.
31 December 2014
To understand the concept in a better way you should first need to understand whether Place of Provision of provision of service (POP) as per POP rules is in India or outside India. if POP is not in India then even the question of Service Tax changeability is not arise. But if the POP is in India, the it falls in the ambit of service tax and being services from outside India it comes under the preview of Reverse charge mechanism of service tax.
As per Rule 9 of the POP rules, The Place of provision of service will be the location of service provider in case of following services: Specified services such as: • Intermediary services • Online information & database access or retrieval services • Banking • Hiring of means of transport (up to 1 month) So IT Services and Bank Guarantee services will fall in this category and therefore the POP is USA. Hence no service tax Implication.
In case of Trade mark, no specific rule cover this service hence it hits the general rule i.e. Rule 3, As per Rule 3, POP will be location of Service Receiver i.e. Your Company. Therefore POP is India. Service tax under reverse charge need to be paid on 100% value of the service. You can refer this link for reverse charge refer table 2 of the link
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