Inter branch Transactions

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suparna k s (Querist)
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07 April 2009 A company has two branches one at Pune and another at Bangalore. Pune is 100% EOU and the services rendered by it is exempt from the Service tax.

The concern is Pune branch renders the services to customers but Bangalore branch collects the money from the customers. Is pune exempt from the payment of service tax liability?

CA.Hanumantha Reddy

CA.Hanumantha Reddy (Expert)
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07 April 2009 No, service tax is payable by pune branch though it is 100% EOU. Further, even if Bangalore branch receives money it does not change the liability concept, it is merely a procedure aspects to collect money.
hanumatha@gmail.com

suparna k s

suparna k s (Querist)
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07 April 2009 Please explain clearly

CA.Hanumantha Reddy

CA.Hanumantha Reddy (Expert)
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07 April 2009 No exemption is available if EOU provides any taxable services to a unit in DTA.

suparna k s

suparna k s (Querist)
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08 April 2009 Thank you Mr. Hanumantha Reddy.

But, the Pune branch has exported the services and the Bangalore branch has received the amount from customers towards the exports made by the Pune branch. Now,
As the service rendered is received outside India and the payments for the same are received by Bangalore Branch, what is the implications of the same?

Is pune branch exempt of service tax? Is bangalore branch required to pay tax. it is quite confusing

CA.Hanumantha Reddy

CA.Hanumantha Reddy (Expert)
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08 April 2009 Yes, it is not liable to pay service tax as these services are exported outside India. Further, pls look at your accounting entries in both the branches it is quite difficult to account. The methodology followed may not suits for financial reporting unless it is registered as input service distributor.

Further, pune branch is not liable to pay service tax as the services are exported. Bangalore branch is not liable to pay service tax as it does not render any services.

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