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Salary of Employees transferred to Group Company

Sachin Jain (Manager- Finance & Accounts)   (42 Points)

14 July 2010  

ABC Ltd primarily operates in Designing Work and is subject to Service Tax. 

It has transferred some of its on roll employees to its group company XYZ Ltd for a particular period for the sole use of their services by XYZ Limited. Salary during this period is being paid by ABC Ltd only and Debit Notes for the same are raised by it on XYZ Ltd.

Whether ABC Ltd is required to collect Service Tax on the amount recoverable from XYZ Ltd under Manpower Service Category?


 1 Replies

Prabhat Kumar (Advocate & Consultant) (1912 Points)
Replied 15 July 2010

In a taxation every entity is a seperate entity. Here you are a service provider and service recepient is a different company and consideration is paid. So this supply of employees from one concern to another is taxable subject to general exception and it falls under manpower recruitment and supply agency service.

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