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Whether service tax is applicable on management services.

Himanshu Nagpal (Practice) (76 Points)

17 February 2016

Company in which I am working is subsidiary of a big group from Sweden and our holding company raise a invoice of management services on us. So I just want to confirm whether Service Tax is applicable on this management fees and if yes then how we need to pay this under reverse charge?

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8 Replies

Amit Bhatkar (Service) (457 Points)
Replied 17 February 2016

Dear Himanshu,

Surely service tax shall be applicable on management ( service ) fees paid by Indian subsidiary to their overseas holding company.

There is no difference of opinion.

Whatever service tax paid by your Indian subsidary , you are eligible to take input credit.

Best Regards

Amit

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CA Prakash N (Head - Indirect Tax (GST & FTP)) (373 Points)
Replied 17 February 2016

In addition to Mr. Amit's suggestion, you are liable to pay tax under reverse charge basis under category of Import of service.

Calculation of service tax payable.

Total consideration paid to HO*14% (ST)

Total consideration paid to HO*.5% (Swachh Bharath Cess).

To be remitted to Govt in CASH (No credit adjustement).

Cenvat Credit

Service tax (14%) credit can be taken as credit after payment. However to the extent of .5% (Swatch Bharath Cess) credit can't be taken.

Amit Bhatkar (Service) (457 Points)
Replied 17 February 2016

Dear Prakash ji - good update.

I was not aware that Swatch Bharath Cess is not eligible for credit.

My further question - when we deduct the TDS on service fees, whether it shall be on Invoice value or Invoice + top up service tax amount ?

Regards

Amit

Amit Bhatkar (Service) (457 Points)
Replied 17 February 2016

Dear Prakash ji - good update.

I was not aware that Swatch Bharath Cess is not eligible for credit.

My further question - when we deduct the TDS on service fees, whether it shall be on Invoice value or Invoice + top up service tax amount ?

Regards

Amit

sagar (1) (43 Points)
Replied 17 February 2016

tds shall be deducted only on invoice amount not including of service taxes

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Amit Bhatkar (Service) (457 Points)
Replied 17 February 2016

We are recording this service tax amount as a top up to Management Fees. We are charging this amount directly to account head SERVICE FEES - GROUP in profit and loss account. This amount is acharged over and above to regualr service fees invoice. The reason is that we dont avail any credit of this amount becasue we dont have any service turnover.

There may chance, that, in future, income tax department may ask to deposit TDS amount on this excess top amount which was debited to P&L under service fees account.

Regards

Amit