Pawan Verma (Assistant manager finance) (186 Points)
22 December 2011Hiii, please do give your views!
In one of my audits, the client is paying Royalty based on percentage of sales to a foreign company for using its brand name . As per the agreement, all the taxes will be borne by the Foreign company (service provider).
As such, the unit is deducting service tax from the payments made and remiting it to the government. However it is “also” taking input credit.
I feel it is enjoying double benefit (technically).
Is it a valid practise?
Dipjyoti Majumdar
(CA in service & CS. dipmaj@ rediffmail.com )
(3468 Points)
Replied 22 December 2011
If the Indian entity is paying service tax on reverse charge mechanism in cash, it can take the payment as cenvat credit.
Prasad
(Sr. Manager)
(617 Points)
Replied 22 December 2011
agree with Dipjyothi, the company is correct in its practice.
Pawan Verma
(Assistant manager finance)
(186 Points)
Replied 23 December 2011
@ thanks for that, but again it is not the indian company that is incurring the service tax!
Or do u mean that government is not concerned about the Internal arrangements between these two companies?
Gagan Jain
(AUDITOR)
(25 Points)
Replied 28 December 2011
Sir I want to know the at what point of time service tax is leveble in case of rent a cab scheme. there are three stages first when operator maintian daily slip of outgoing and ingoing of vehicle from godwen and IInd when he make payment detail of vehchle and IIIrd when he issue final bill to client along with daily slip and payment detail. At what time service tax liability would arise.
CA Prabhat Gupta
(Manager (Indirect Taxes))
(821 Points)
Replied 28 December 2011
Mr. Pawan,
Service Tax being an indirect tax has to be collected from service receiver and paid to government by the service provider. Service receiver is allowed to take credit of service tax so paid. In case of services provided from outside India, the incidence of tax has been shifted from service provider to service recepient as per Rule 2(1)(d) of Service Tax Rules, 1994. Hence same as in case of TDS, Service tax is to be deducted & paid to government (only difference is that TDS is a direct tax). But the service remains an input service and the receiver of such service remains eligible for the credit of service tax paid. Where does double benefit comes into question?
CA Prabhat Gupta
(Manager (Indirect Taxes))
(821 Points)
Replied 28 December 2011
Mr. Gagan,
Please refer to The Point of Taxation Rules, 2011 as amended.
Rule 3 has been amended to provide that the point of taxation shall be as follows:
(a) Date of invoice or payment, whichever is earlier, if the invoice is issued within the prescribed period of 14 days from the date of completion of the provision of service.
(b) Date of completion of the provision of service or payment, if the invoice is not issued within the prescribed period as above.
The applicability of the rule will be clear from the illustrations in the following table:
|
S. No. |
Date of completion of service |
Date of invoice |
Date on which payment recd. |
Point of Taxation |
Remarks |
|
1. |
April 10, 2011 |
April 20, 2011 |
April 30, 2011 |
April 20, 2011 |
Invoice issued in 14 days and before receipt of payment |
|
2. |
April 10, 2011 |
April 26, 2011 |
April 30, 2011 |
April 10, 2011 |
Invoice not issued within 14 days and payment received after completion of service |
|
3. |
April 10, 2011 |
April 20, 2011 |
April 15, 2011 |
April 15, 2011 |
Invoice issued in 14 days but payment received before invoice |
|
4. |
April 10, 2011 |
April 26, 2011 |
April 5, 2011 (part) and April 25, 2011 (remaining) |
April 5, 2011 and April 10, 2011 for respective amounts |
Invoice not issued in 14 days. Part payment before completion, remaining later |
Badal bharti
(Article)
(33 Points)
Replied 30 December 2011
If Co-owners recieving total rent of 165000 pm from a immoveable property and lease deed clearly define 50% share of rent of each co -owner Are they liabe to service tax registration............
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