Pure agent

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Ananta prasad tripathy (Querist)
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27 October 2010 X Ltd is an exporting company.It entered with an agreement with a partnership firm,say Y. Y will act as a pure agent for X ltd as per service tax (Determination Of Value Rule 2006) Rule No-5.Y as a service provider,procure service from 3rd parties and provide it to Xltd, which is the service recipient.Y pays to the 3rd party the value of service including service tax which subsequently reimbursed by X ltd.that means if Y paid Rs100+service tax 10,X Ltd reimbursed 110 only not more.The 3rd party raises bill(100+10) in the name of Y.In this example,considering the concept of pure agent as per service tax (Determination Of Value Rule 2006) Rule No-5

Whether input service tax credit can be taken by the service provider Y, or service recipient X Ltd or none of these.

My second question is whether input service tax credit can be carried forward to an unlimited period or it will lapse?

CA Punit

CA Punit (Expert)
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28 October 2010 since the 3rd party raises bills in name of Y,
ie.Y holds title to the services so procured, he may not be treated as a pure agent
& if so.. the service will be an input service for Y & he can take credit thereon

further, service tax credit can be carried forward till the business of providing the service is discontinued
ie. unlimited period subject to changes made in service tax law

other opinions appreciated

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