Applicability of service tax

This query is : Resolved

Querist : Anonymous

Querist : Anonymous (Querist)

06 December 2013
Dear Sir,

I am a Practicing Chartered Accountant. I have a query regarding applicability of Service Tax Act in the following case:

The detail of the case is as under:

My client, a Private Limited Company has been appointed as advisor/ consultant by a Foreign Company in Germany known as Evonik Industries AG, (has a group of companies) to act as advisor/ consultant for them.

This Group also has a regional office in Singapore as Subsidiary Company which is the wholly owned of Evonik Industries AG.

My client was earlier dealing with Evonik RohMax Germany, now renamed as Evonik Industries AG. India was under Europe then and now India is under Asia Pacific Region, therefore, my client now works through Evonik Oil Additives Asia Pacific Pte Ltd, Singapore which is the wholly owned by Evonik Industries AG. My client is to act as advisor/ consultant for the approval of their product by the Indian customers. After the product is approved by Indian customers, the Subsidiary Company in Singapore directly makes sale and realize payment against supplies.

Once the transaction is completed (i.e. sale is effected and payment is received), my client will get a share of its Commission from Singapore Subsidiary Company directly to its Bank Account in India.

My client does not raise any bill to Singapore Subsidiary Company for its services rendered. The understanding is that the Commission is payable directly to Company’s Bank Account in India IF and when any transaction is completed.

The Foreign Company, Evonik Industries AG has no permanent establishment in India. It has a marketing outfit by the name Evonik India Private Limited. The Subsidiary Company at Singapore also does not have any office in India, but has one man who looks after its business in India. And all his expenses are booked under Evonik India Private Limited and then apportioned proportionately to relevant companies.

Kindly Advise whether my client is covered under Service Tax for the above services and liable to pay service tax though not recoverable from Singapore Subsidiary Company?

ADITYA

ADITYA (Expert)
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06 December 2013 SERVICE TAX IS APPLICABLE AS YOUR CLIENT IS PROVIDING SERVICES TO A COMPANY SITUATED OUTSIDE INDIA AND IS GETTING COMMISSION FOR THE SAME, AFTER TRANSACTION IS COMPLETED.

YOUR CLIENT IS NOT RAISING ANY INVOICE FOR THE SERVICES PROVIDED IS NOT AN EXCUSE AS YOUR CLIENT IS GETTING COMMISSION ON CERTAIN AGREEMENT / MOU AND MAY HAVE PROVIDING ACCOUNTING ENTRY TO THAT EFFECT.

THE CONSTITUTION, OF YOUR CLIENT ANT ITS PRINCIPAL IS ALSO DIFFERENT AND NOT THE SAME.

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