Service tax on import of services

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This query is : Resolved

CA Chartered (Querist)

19 November 2015 Dear Experts,
I need your valuable inputs on service tax applicability on Import of services.

Fact of the case: Our is a private limited company a wholly owned subsidiary of Thailand based company. The company is into import and trading of Pharmaceutical chemicals. The company earns commission income from foreign suppliers.
Also the company is reimbursing the expenses to its holding company. The expenses are in nature of allocation of headquarters charges charged by holding company to all of its subsidiary. Mark-up is added to the allocation charges for transfer pricing purposes.

Further, the company avails services of consultants, contractors, rentals and many other services, Further company pays service tax on GTA, legal, labour etc on reverse charge basis.

Query:
1) Is service tax applicable on commission income? In view of amendments to rule 3 post 1st October 2014 the commission income received from foreign party will also be taxable.
We are earning foreign commission on material sold by Foreign vendor to direct customer in India. What would be the point of taxation for this and Is service tax payable by us on this income earned?

2) Is service tax applicable on holding company head quarter charges allocated to Indian subsidiary?

3) Can we take input tax credit of services received like consultants services, auditors services, rental services, security etc against service tax payable if on commission and head quarter charges? (considering we are trading company)

Your inputs are highly appreciated.

Thanks,

CA R SEETHARAMAN

CA R SEETHARAMAN (Expert)

20 November 2015 1 yes service tax applicable on commission income.
2 Yes service tax applicable and it is payable under RCM.
3 Input tax credit can be taken only on commission received provided the inputs are used to earn commission.

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