Ad Free CAclubindia and Daily Updates on your Mobile. Subscribe Now!

Service Tax on Allocation Exp

Bhavana (Job) (25 Points)

27 January 2010

Hi,

1. Do we need to deposit Service Tax on allocation of Expenses received from regional office outside India.

2. Can we claim this as Input Service Tax

Reply
Follow
Share

6 Replies

Amir (Learner) (4016 Points)
Replied 27 January 2010

Dear Bhavana,

Service Tax is to be deposited on Income/Receipts & not on Expenses..

Plz clarify/elaborate ur query..

Upgrade to CAclubindia Pro. Subscribe Now!

Bhavana (Job) (25 Points)
Replied 27 January 2010

Agreed. If we receive allocation from abroad which is basically apportionment of management exp to all units located in different country

Amir (Learner) (4016 Points)
Replied 27 January 2010

Dear Bhavana,

U mean Head office has given certain amount to the office in India as a reimbursement of expenses..

If this is the case then Service Tax is not applicable, because there has to be 2 different person one service provider & the other is service receiver & the present case is that of Branch Office i:e the owner is a single person.

Ritesh (Financial Controller) (51 Points)
Replied 05 March 2010

I Feel more important issue in allocation of expenses is whether any service is provided. For instance if allocation pertains to any expenses incurred on behalf of a group company and the expenses are only reimbursed back no services shall be construed to be rendered and hence service tax shall not be charged.

Hope the issue is cleared.

Incase any expert feels that this is a wrong interpretation do revert.

saravanan (articled assistant) (37 Points)
Replied 07 March 2010

Hi all

Service tax is applicable only for taxable services provided. In the instant case, if the person incurs the expenses on behalf of another person and raises debit note to claim the same, then the said activity of the person collecting the reimbursement is "Pure Agent".

Here, it is better to get the bills of expenses incurred named that the services are provided on behalf of another person

For instance, X ltd incurs expense on behalf of Y ltd. Here, it is better to get the bills named as X ltd for Y Ltd so as to prove that the said expenses are incurred on behalf of another person. Then service tax liability won't come.

COMMENTS ARE WELCOME

Saravanan

Upgrade to CAclubindia Pro. Subscribe Now!

Ritesh (Financial Controller) (51 Points)
Replied 08 March 2010

Mr Amir,

Even in case Head office provides services to branch office and if head office is situated outside India branch office may be chargeable to service tax under reverse charge mechanism.

This is an exception to common rule wehrein service tax can be charged even if services takes place between one entities.

Comments welcome