close x


Service Tax - Foreign Agency providing service in India

Chief Executive


We had conducted a training program in India for which the trainer was invited from USA and the company  (Name XX) to which he belonged was paid in Dollars.

We collected Service Tax from the particpants of the training program.

The question is who fulfills the service tax liability of Company XX in India for the fee which was paid to them.

One opinion being given is that since Company XX does not have a presence in India, the responsibility for paying service tax on their behalf is ours. After we have paid the service tax on their behalf, we can claim a set off aginst the service tax we have collected and then pay the net tax.

The second opinion being given is that whatever service tax we have collected from the training participants - we pay that complete amount to the government. In this option we neither pay any service tax on behalf of the foreign company and therefore neither claim any set-off.

Which is the correct rule position ?

 
Reply   
 
Chartered Accountant


Dear Gagandeep,

You are liable on reverse charge basis to pay the service tax on the Non Residents poayments made at applicable rates as on date of service provision. ST ot be paid in month subsequent to your payment ot the NR. You are required to pay as the service is performance based and used in India.

You can claim this as a credit while making you payment once you recive the amount from your client.

The other options are not available under law and would result in disputes.

 
Reply   
 


Sr. Executive


Originally posted by :Gagandeep Singh
"

We had conducted a training program in India for which the trainer was invited from USA and the company  (Name XX) to which he belonged was paid in Dollars.
We collected Service Tax from the particpants of the training program.
The question is who fulfills the service tax liability of Company XX in India for the fee which was paid to them.
One opinion being given is that since Company XX does not have a presence in India, the responsibility for paying service tax on their behalf is ours. After we have paid the service tax on their behalf, we can claim a set off aginst the service tax we have collected and then pay the net tax.
The second opinion being given is that whatever service tax we have collected from the training participants - we pay that complete amount to the government. In this option we neither pay any service tax on behalf of the foreign company and therefore neither claim any set-off.
Which is the correct rule position ?

As a Service Receiver, it is your sole responsibility to pay service tax on payment made by you to your Foreign Seriver Provider. As a Service Receiver, you can avail CENVAT of this service tax paid.

Secondly, if you are giving / providing any taxable serivce to your customer ( Participent), then as a Service Provider, you have to pay servioce tax on the amount received ( Fee) by you.  You can setoff this service tax liability against CENVAT credit taken on Input Serivce.

 

"


 

 
Reply   
 

LEAVE A REPLY



    

Your are not logged in . Please login to post replies

Click here to login   Click here to Register


  • Use thank button to convey your appreciation.
  • Maintain professionalism while posting and replying to topics.
  • Try to add value with your each post.

 



Share on :