22 February 2014
Our Client, a private limited company based in India has taken loan from Overseas Private Investment Corporation (OPIC), an independent US Finance agency and paid commitment charges and other charges to OPIC only.
Whether commitment charges paid attracts Service Tax, if yes under which Rule/Section.
In our opinion Place of Provision of Services Rule 9, if Service Provider ie Bank or Financial Institution or NBFC is outside India, Service Tax is not chargeable, provided he must be a Account Holder and definition of Accounts says " An Account bearing interest to depositor". While our Assessee is not depositor, he is a borrower.
25 February 2014
If i understood correctly, the term 'commitment charges' is nothing but 'commision'or 'bank charges'. Place of provision of service is meant to calrify the jurisdiction to find out the tax liability. Rule 9 of said Rule which you quoted only talks about the services provided by the banks etc to the acocunt holders and in such cases the place of provision is that of service provider. If such a service provider is outside india, then the liability is upon the receiver of servcie. I your case Rule 9 is not applicable as you are not an account holder. For you Rule 3 will be applicable which says that place of provision is location of recipient of service , i.e. you, and hence falls under the jursidiction of Finace Act 1994.(please see the "Taxation of Service:An Education Guide"} Since the servcie provider is out side india it will be termed as a import of service and the recipient is liable to pay the service tax under the RCM.(see Entry 10 of Notificatin 30/2012. Regards
CAclubindia
