05 July 2013
"A" is the assessee, the Managing Director of a manufacturing unit "ABC" in India last 15 years and has 2 manufacturing units in his group companies and he is the managing director for both companies.(ABC & XYZ)
"B" an Inidan citizen who is planning to set up a manufacturing unit similar to the A's unit in UAE and seek service from his friend "A" for the same. The "A" has sound knowledge and practical experience in this field so agreed to provide service to B's company for setting up an unit.
"A" has visited B's place in UAE in the capacity and designation as the Managing Director of ABC company and provided the service for a remuneration for a lump sum amount of INR 50 Lakh as the consultation charges.
After completion of the work "B" paid the amount by way of NRI cheque in the name of "XYZ" company which is the second company of A's group. A clerical error was occurred while sending the account detail of ABC company. Instead of sending the amount in ABC, the "B" has given the cheque in XYZ company on December 2011. Later, a journal passed in the books and transferred the consultation amount from XYZ to ABC. ABC accounted the transaction as Consultation Charges Received and declared as other income of INR 50.00 Lakh.
During the time of the Central Excise audit in ABC company, they made a querry that the assessee has not made any payment as service tax on the income by way of consultation charges of Rs,50.00 Lakh. But the A has never collected service tax from B where as the service is treated as export of service.
"A" and ABC is not a regular service provider.under this circumstance,
1. Does ABC or A liable to pay service tax? If yes, please advice.
2. If "A" is liable to pay the tax, is there any scope for claim the rebate on this export of service?
3. Is there any provision for utilizing the input credit for the above liability?
Awaiting for experts opinion. Will be thankful for the opinion and advice.
05 July 2013
Apparently it looks like, Since A and B both are in taxable territory, the transaction will be regarded as local transaction and liable to service tax.
However for want of further facts, it is assumed as covered under Rule 3 of PoPS Rule, 2012.
For payment of this service tax, input credit can be utilised subject to it satisfies CENVAT Rules 2004 provisions.
CAclubindia
