Invoice
This query is : Resolved
Querist : Anonymous
Querist :
Anonymous
(Querist)
10 February 2016
We offer services in China and invoice a US company for reimbursement of expenses . We buy a ticket in India and pay service tax on it. Can we take credit on this service tax?
We incur expenses in China like Hotel, taxi, food etc. Do we have to charge service tax on these expenses when billing to the US company?
We incur expenses in China like Hotel, taxi, food etc. Do we have to charge service tax on these expenses when billing to the US company?
Suresh Ramaswamy
(Expert)
21 February 2016
To qualify as Export of Services on which no service tax is leviable three conditions have to be followed:
(a) The services are rendered to a non-resident person, who does not have any presence in the taxable territory like a branch office, representative office or a licencee doing their business in India, except Jammu & Kashmir.
(b)The services are rendered abroad.
(c) The consideration is received in convertible foreign exchange through proper channel.
In your case the services were rendered outside India in China. The services were rendered to a US company - whether the US company is a non resident as per the conditions laid down in (a) above - has to be verified. It is assumed that US company will be settling your invoice in USD through proper banking channels. If the US company qualifies as a non-resident then your services are Export of Service and you need not charge Service Tax on the US Company.
With effect from 1st April 2015, reimbursement of expenses is part of the consideration as per amended provisions of Valuation of Service Rules. Therefore, reimbursement per-se is subject to service tax. HOWEVER, when the service rendered itself is non-taxable, the reimbursement of expenses on such services cannot be subjected to service tax. Hence no service tax needs to be charged on the US company.
The service tax paid on foreign travel ticket cannot be claimed as Input Credit because the output service is not taxable.
(a) The services are rendered to a non-resident person, who does not have any presence in the taxable territory like a branch office, representative office or a licencee doing their business in India, except Jammu & Kashmir.
(b)The services are rendered abroad.
(c) The consideration is received in convertible foreign exchange through proper channel.
In your case the services were rendered outside India in China. The services were rendered to a US company - whether the US company is a non resident as per the conditions laid down in (a) above - has to be verified. It is assumed that US company will be settling your invoice in USD through proper banking channels. If the US company qualifies as a non-resident then your services are Export of Service and you need not charge Service Tax on the US Company.
With effect from 1st April 2015, reimbursement of expenses is part of the consideration as per amended provisions of Valuation of Service Rules. Therefore, reimbursement per-se is subject to service tax. HOWEVER, when the service rendered itself is non-taxable, the reimbursement of expenses on such services cannot be subjected to service tax. Hence no service tax needs to be charged on the US company.
The service tax paid on foreign travel ticket cannot be claimed as Input Credit because the output service is not taxable.
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