02 September 2014
XYZ (Public Co.) sales with two brand name – 1. XY 2. YZ. The management has taken two decisions that ,
1.Marketing staff of YZ brand to be transferred to ABC Pvt. Ltd (ABCPvt.Ltd.) (A Group Company) from 1st April 2014.
2.YZ brand’s sale routed through ABC Pvt Ltd & YZ brand transfer to ABCPL from 1st April 2014.
3.On the basis of above decision, all marketing staffs have been transferred from XYZ to ABCPL from 1st April 2014. On April 2014 onwards, all marketing staffs are employee of ABCPL.
4.The management was in process to set up sales transactions routed through ABCPL but they didn’t get through & cancelled the above decisions in the month of July2014 & Bonzer7 brand will continue with XYZ Co.
5.Till today, there is not a single sale transaction routed through ABCPL but ABCPL has incurred expenses of Marketing staff mainly salary of Rs.1.86 Crore from April to July -2014, who are working for XYZ Co.
6.Now the management has decided to reimburse above expenditure to ABCPL.
7.So ABCPL raised debit note to XYZ Co. with service tax of 12.36% as supply of Manpower Service because employees of YZ market staff are working for XYZ India Ltd. ( as they used to do earlier) but on payroll of ABCPL.
From the above situation we have following issues /Questions :
1.Whether Service Tax charged by ABC Pvt. Ltd. under Manpower Supply is proper? ( As per CBEC Circular No. 137/35/2011-ST dated 13.07.2011) 2.What XYZ India should accept an Invoice or a Debit Note for this payment? 3.Whether XYZ India can avail credit of service tax paid in this transaction?
Please ans me clearly and separately as per my situations.
03 September 2014
Firstly please clarify if XYZ Co and ABC (P) Ltd are group companies.If that is the case then as per a recent judgement of Gujarat High Court ,in the case of Commissioner of Service Tax Vs. Arvind Mills Ltd. [(2014) The Gujarat HC held that service tax was not payable on supply of manpower by the assessee to its group companies as there was no relationship of agency and client between the assessee and the subsidiary companies. To take benefit of the above case law: 1.Make sure that the staff of ABC Ltd did not work under the superintendance and control of XYZ Ltd. 2.Make proper agreement to substantiate that deputed employees sent for limited period on actual cost sharing basis.
If it is difficult to prove the same ,then service tax shall be paid under man-power recruitment.
04 September 2014
Debit note can be raised if i pay mn pwr service under reverse charge mechanism. then it is valid in the eyes of law to get the credit in my books.in this case xyz being public company who transfer the employees to group company that is ABCPL. ok if i go with above situation and pay the ST under Mn pwr service then XYZ can take the credit on the basis of debit note. pls reply.
04 September 2014
Another issue which is separate from Service tax. In this case employees are on the payroll of the Group company Now decision taken that it is again transferred back to the original company. Then How to make payment.Salary paid by group co. Now how can group co. recover the money? either Debit note what is correct option? please let me know.
04 September 2014
I think it would be better not to charge any service tax as the transaction is between group companies.Apply the case of Arvind mills discussed above.
Debit note will the right way for group company to recover salary paid.
05 September 2014
I have a doubt on work contract. Service provider gives service in Jammu Kashmir for advertising Hoarding on House Boat. They have prepared Arch gate and on which name of Company displays. Material and Labour provided by provider. He raised a bill in which he has given Rate/Sq Ft.There is no breakup for material and Labour given in the bill. he has calculated VAT on Total Gross amount. he has said that it is my Original Contract and ST Liability is relating to 40% as per work contract.
1) He told that is it original contarct? he has just to prepare a design hoarding and althat so how to consider the activity in work contract defination?
2) what is percentage apply for Service tax calculation. both for Service provider as well as service receiver.
we have to amend bill of the provider so tel me how to execute the transaction?
05 September 2014
I have a doubt on work contract. Service provider gives service in Jammu Kashmir for advertising Hoarding on House Boat. They have prepared Arch gate and on which name of Company displays. Material and Labour provided by provider. He raised a bill in which he has given Rate/Sq Ft.There is no breakup for material and Labour given in the bill. he has calculated VAT on Total Gross amount. he has said that it is my Original Contract and ST Liability is relating to 40% as per work contract.
1) He told that is it original contarct? he has just to prepare a design hoarding and althat so how to consider the activity in work contract defination?
2) what is percentage apply for Service tax calculation. both for Service provider as well as service receiver.
we have to amend bill of the provider so tel me how to execute the transaction?
CAclubindia
