Service Tax on Allocation Exp

Dear Bhavana,

Service Tax is to be deposited on Income/Receipts & not on Expenses.. 

Plz clarify/elaborate ur query..

Agreed. If we receive allocation from abroad which is basically apportionment of management exp to all units located in different country

Dear Bhavana,

U mean Head office has given certain amount to the office in India as a reimbursement of expenses..

If this is the case then Service Tax is not applicable, because there has to be 2 different person one service provider & the other is service receiver & the present case is that of Branch Office i:e the owner is a single person.

I Feel more important issue in allocation of expenses is whether any service is provided.  For instance if allocation pertains to any expenses incurred on behalf of a group company and the expenses are only reimbursed back no services shall be construed to be rendered and hence service tax shall not be charged.

Hope the issue is cleared.

Incase any expert feels that this is a wrong interpretation do revert.

Hi all

Service tax is applicable only for taxable services provided. In the instant case, if the person incurs the expenses on behalf of another person and raises debit note to claim the same, then the said activity of the person collecting the reimbursement is "Pure Agent".

Here, it is better to get the bills of expenses incurred  named that the services are provided on behalf of another person

For instance, X ltd incurs expense on behalf of Y ltd. Here, it is better to get the bills named as X ltd for Y Ltd so as to prove that the said expenses are incurred on behalf of another person. Then service tax liability won't come.

COMMENTS ARE WELCOME

Saravanan

Mr Amir,

Even in case Head office provides services to branch office and if head office is situated outside India branch office may be chargeable to service tax under reverse charge mechanism.

This is an exception to common rule wehrein service tax can be charged even if services takes place between one entities.

Comments welcome