Import of services

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Tarun Nuhani (Querist)
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08 October 2009 Indian Company contracted a Canadian Company for some consultancy service, Canadian Company having a Permanent Establishment(P.E) in India, The Expatriate of Canada Comes here in India & rendered the services to that Indian Concern at the Clients( Indian co.) place only & returned back to his home country. The Indian Company has paid the fees of the Canadian Company in Canada in Dollars. The question is-

1. Should it be regarded as Import of Services, if yes than to whom, the P.E or the Client
2. Should the Permanent Establishment is liable to pay service tax in India on that services, as the Invoicing is being done by canada & the Payment is recd. in Dollars in Canada, Singh the canadian company having a PE in India, & because of that PE it is liable to pay service tax.
3. Is any case law supporting this ( i mean, The Liablity to pay Service Tax in this regard comes on to the Indian Company & not the P.E)

Please Advise

CA.Hanumantha Reddy

CA.Hanumantha Reddy (Expert)
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08 October 2009 In your case and by understanding the above query is that the agreement is between Indian Company and Canadian Company and not with India based Canadian Company (i.e. which is having a P.E. in India). In this regard, yes it is considered as Import of Service under Service Tax provisions. And the liability is vest with the recipient of the service. Since, in service tax provisions the branch and head office is considered separate. Hence the P.E. is no relevance in this matter.
should you need further clarification, pls do let me know

Tarun Nuhani

Tarun Nuhani (Querist)
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09 October 2009 Continuing the above query, To establish the profitability of the P.E. (in India)& to comply with the Income tax, P.E booked all the Consultancy expenditure paid by the Canadian Company to the consultants in their books of accounts..........

Whether this will be treated as Import of services, Any service tax applicabilite or not or this will be treated as service provided to self as it is in between Head office & P.E., whereas the actual service is being rendered to the client but since the expenditure is been booked in the P & L of P.E, now what are the service tax impact in relation to P.E

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CA.Hanumantha Reddy

CA.Hanumantha Reddy (Expert)
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09 October 2009 No relevance to your earlier query. Since, the services are provided to an entity in India by Canada Company and not to Indian P.E. Hence where is the question of expenditure incurred by Canada Company. Pls clarify me with more details. What Consultancy expenditure incurred by Canada Company and for what purpose.