Service tax on cost sharing arrangement

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This query is : Resolved

Sanchit Jain (Querist)

24 October 2008 A company has entered into a cost sharing arrangement with its group companies. All the expenditure are paid by that comapny and recovered from other comapnies by raising a debit note. The company charges certain fees for these services.

Is service tax required to be charged on the entire amt. of debit note, even if it shows separately the cost incurred and fees charged along with documentary evidence?

My opinion no service tax on reimbursements..

Can the other companies claim Cenvat credit of the cost incurred by the main Company?

CMA Jitendra Singh

CMA Jitendra Singh (Expert)

25 October 2008 1.The facility of CANVAT credit will be available only to parent/source company.

2.Since with the reimbursement of expenses ,there is fees ,hence ,service tax will be applicable because this does not seem cost reimbursement.

S.Srinivasaraghavan

S.Srinivasaraghavan (Expert)

25 October 2008 The taxability or otherwise depends upon the presence of service. No service no service tax. THe onus of maintaining that the arrangement is expenditure sharing and not service provision is on the company concerned.

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