Service tax on expenses of foreign tour by a director

This query is : Resolved

Rajesh Langalia (Querist)
Follow

09 December 2015 My query is bit urgent to be replied to. pls. reply if any body has concrete legal evidence to prove the reply. whether expenditure incurred by a company on a foreign tour of a director attracts service tax considering import of services and place of provision rules ? pls. elaborate and provide some case law if available.
thanks in advance

Mahesh Paryani

Mahesh Paryani (Expert)
Follow

11 December 2015 Your query is not clear

could you break you question in 3 parts

1) What is the service being rendered
2) What is the consideration given to the service provider in connection with rendering of service
3) Where is the service performed

Regards

Asha Kanta Sharma

Asha Kanta Sharma (Expert)
Follow

24 July 2025 Regarding **service tax on expenses of foreign tour by a director**, here’s a detailed explanation based on Indian service tax law as applicable before GST:

---

### Key points to consider:

1. **Service tax on Import of Services:**

* Under the Finance Act, 1994 (service tax law pre-GST), *import of service* attracts service tax under the **Reverse Charge Mechanism (RCM)**.

* Import of service means receiving services from a service provider located outside India.

2. **Place of Provision Rules:**

* As per Service Tax Place of Provision of Service Rules, 2012 (before GST):

* For *business entities*, the place of provision of services is generally the location of the recipient.

* Hence, if the company (recipient) is located in India and receives services from a foreign service provider, the place of provision is India.

3. **Is expenditure on foreign tour of a director an imported service?**

* If the company is **paying a foreign travel agency / foreign tour operator** (located outside India), then it is an import of service, and the company is liable to pay service tax on the value of such service under RCM.

* However, if the foreign tour is booked through an Indian agent, then the Indian agent’s services are taxable as domestic service.

4. **What if the company directly incurs expenses like air tickets, hotel bookings from foreign suppliers?**

* These will attract service tax under RCM, as imported services.

5. **What if the director is a non-executive director on the Board and the tour is for official purpose?**

* The expenditure on foreign tour for official duties is a business expense and is considered a taxable service imported by the company.

---

### Legal Backing and Case Law:

* **Section 66A** (Service tax on Import of Services) provides the basis for RCM.

* **Central Board of Excise and Customs (CBEC) Circular No. 178/4/2015-ST dated 19th March 2015** clarifies import of services and payment of service tax on foreign tour packages.

* **Place of Provision Rules, 2012** (Rule 3, Rule 9)

* Case law is limited, but the general practice and department’s position is that **services procured from foreign tour operators for foreign tours for business purposes attract service tax under RCM**.

---

### Summary:

| Scenario | Service Tax Liability |
| ------------------------------------------------------------------------ | --------------------------------------------------------------------- |
| Booking foreign tour directly from foreign tour operator (outside India) | Service tax payable under RCM by company |
| Booking foreign tour via Indian travel agent | Service tax payable by Indian agent as provider |
| Director traveling abroad on company’s expense for business purpose | Company liable to pay service tax under RCM on imported service value |

---

### Important:

* The company must self-assess and pay service tax on imported services under RCM.

* The value on which service tax is paid should include the foreign tour charges excluding GST.

* The company should maintain invoices and proof of payment.

---

If you want, I can help draft a sample calculation or format for service tax under RCM on foreign tour expenses. Would that help?

You need to be the querist or approved CAclub expert to take part in this query .
Click here to login now