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GST implications on Hotel Reimbursements by foreign company

karan jit singh 
on 18 May 2020


Many times we see that foreign entity booked accommodation in hotel in foreign country for employees of Indian entity and Foreign entity charged the amount to Indian entity by raising reimbursement invoice. Generally, Indian entity don't pay tax under RCM on said invoice considering the POS of service falling outside India. It may be noted that foreign entity doesn’t possess license / approval of provision of accommodation / Hotel services, foreign entity may considered as providing arrangement of accommodation in hotel service or like a travel agent by GST authorities. In such a case authorities may dispute Indian entity not paying tax on such inward supplies.

Taking a conservative stance Indian entity may pay tax under RCM and take credit. 

GST implications on Hotel Reimbursements by foreign company

Now the another question pop out from this that as other story of the coin  the taking credit may be risky also as department can challenge on Input by taking the stance that same is related to immovable property and such immovable property is located outside India.

To resolve this I would like to draw your attention on the grounds laid out by various judicial pronouncements. The Hon’ble CESTAT, Mumbai determined the place of provision of the service rendered by the Service provider located in non taxable territory and held that the Insurance auxiliary services provided by the insurance agents in the non taxable territory were not taxable and therefore, the Appellant was not liable to pay Service tax͘. Further, the Hon’ble Tribunal relied upon the decisions in the case of Mahalakshmi Textile and Nitco Tiles and held that the Cenvat credit taken by the Appellant is nothing but refund of the Service tax paid by them on the services on which they were not required to pay Service tax and the same cannot be denied (reference Bajaj Allianz General Insurance 2014- TIOL- 1540-CESTAT-MUM.

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