Import of services (under reverse charges of service tax)

Import of services (Under Reverse Charges of Service Tax)

Company A having its office in India, has hired a person from Foreign company B as CEO (Under Expat arrangement) from Company B but he was on payroll of Company B for total tenure he worked with Company A. CEO was getting salary from Company B and Company A was paying equalant to his salary to Company B through foreign remittances. Secondly company A was also paying his regular expenses in India such as rent, security charges, and house maintenance charges in India itself.

Can you please suggest me whether it will qualify in Reverse charges of service tax as import of services. If no, what is reasoning behind? If answer is yes what amount will be taxable? Amount paid out side India or both Amount Paid In Indian with Amount paid in Foreign.

Dear Sir,

In my view, amount paid by company A directly to company B is chargeable to service tax @ 12.36%. This is because according to Notification No. 30/2012, if the service provider is in the Non Taxable Territory and the Service Recipient is in the Taxable Territory, the liability to pay tax is on the service recipient. If, the Company B is billing in foreign currency, then the applicable rate of exchange shall be as notified under the Customs Act.

The expenses like rent, house maintenance, etc are not chargeable to service tax. Regarding Security Service Charges, if the service provider is an Individual, Proprietary firm, partnership firm, HUF or AOP, then 75% of 12.36% of tax shall be paid by Company A.