Service tax

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Hariprakash

MBA

23 Points Posted on 23 July 2014

A joint venture was formed between an Indian Company and a foreign MNC for taking up a road contract in India. The Indian company had agreed to pay a fixed percentage as commission to the foriegn company, if the work is awarded to the JV.

1)Will this come under the purview of service tax?

2) What are the procedures to be followed to transfer the amount to the foreign company?

3) Should TDS be deducted from the transaction? if yes, how can the foreign company claim this?

Replies (3)

Hari

71 Points Posted on 23 July 2014

What are the terms of JV agreement and what is the function performed by MNC?

Hariprakash

MBA

23 Points Posted on 24 July 2014

MNC is jst a facilitator for meeting the contract conditions. The whole work will be financed and done by the Indian member

Hari

71 Points Posted on 24 July 2014

My understanding is the MNC is acting as technical consultants, hence place of provision will in taxable territory.

Services provided by persons located in non-taxable territory to persons located in taxable territory will be covered under reverse charge mechanism. The position will be different if MNC provides services through its Indian subsidiary.

For TDS you need to check whether PE is there, actual services performed, Double taxation avoidance agreement etc.