Service tax liability on reimbursement cost

Rishikesh Joshi (Student) (35 Points)

31 March 2015  

Query regarding - Service Tax liability on Reimbursement Cost

Background of the case -

1)  Parent Company is located in China

2)  Parent Company sends its Project Specialist to help the 100% subsidiary company to build a Factory

3)  Subsidiary company pays for "Service Project cost" at agreed rate to Holding Company after charging Service Tax under Reverse Charge Mechanism

4)  Incidental Hotel Charges, Air Fare Charges and other charges were paid by Holding China Company - and these were reimbursed by Indian Subsidiary Company by payment to Holding Company.

Query - (1) Whether Service Tax is payable on the Item no. 4 i.e. Reimbursement of Hotel Charges, Air Fare etc?

(2)  Can the Indian Company get Credit under Excise for payment of Service tax under point 3 and point 4 (if at all Service Tax is payable on point no. 4)

Thanks in advance.