Hello,
Please let me know how my clint can save on Service Tax on my consultancy fee. My clint is proposing to pay me 70% as consultancy and 30% as Conveyance Charges, Stationary, Telephone, Internet and Software etc. Total fee is 13L per annum. Further service tax will be on 70% or on 100% ? Who will keep the accounts of 30% me or clint?
Matter is very urgent. I have to decide and reply.
Kindly help me
Regards
Ranjan
Ranjan,
Raise the bill separately for Consultancy fee (70%) & charge service tax thereon.
To avoid service tax on 30%, bill it separately as reimbursement of expenses.Provide the bill to the client so that he can account for the expenses
In case of reimbursement of expenses,you will have to submit the bills of expenses incurred by you alongwith debit note.
Merely treating the same as reimbursement of expenses, does not mitigate service tax liability.
The same must qualify as a pure agent service to be outside the ambit of service tax.
It must fulfill a number of criterias such as:
It must be the liability principally of the receiver of service. Exact amount without any markup must be charged by th eprovider of service towards such expenses incurred on behalf of the provider. It must have relevant supportings. The same should be in addition to services otherwise provided to the service receiver.
Thus, unless you can prove the above, service tax must be charged on the same.
Hope this clarifies.
Completely agree with CA Shraddha Vora. Raise service tax on whole amount for your safer side if any of the above condition are not fulfilled.
Dear Ranjan,
Pls find out first , This consultancy charges related to what type of service
correct me if i m wrong
|
SN |
Descripttion of a Service |
Percentage ofService taxpayable by Service Provider |
Percentage ofService taxpayable by Service Recipient |
|
(1) |
Insurance agent to insurance agent |
NIL |
100% |
|
(2) |
Transport of goods by road |
NIL |
100% |
|
(3 ) |
Sponsorship service |
NIL |
100% |
|
(4) |
Arbitral services |
NIL |
100% |
|
(5) |
Legal services by Individual advocate or a firm of advocates |
NIL |
100% |
|
(6) |
Support services by Government or local authority (excluding renting of immovable property and certain other specified services) |
NIL |
100% |
|
(7) |
Renting of passenger motor vehicles *- With abatement-Without abatement |
Nil 60% |
100% 40% |
|
(8) |
Supply of manpower for any service * |
25% |
75% |
|
(9) |
Works Contract service * |
50% |
50% |
|
(10) |
Any taxable service where the Service provider is located in a non taxable territory and service recipient located in a taxable territory |
NIL |
100% |
It a Design Engineering consultany fee.
In December 2012 it was held in Delhi High court that Service Tax is not applicable on
reimbursement of expense. However after introduction of Negative list in July 2012, this
issue has again been debated. (Intercontinental consultants and technocrats Private
Limited V/s UOI & Anr [2012-TIOL-966-HC-Del-ST])
High Court held that: Hence reimbursement of expenses cannot be charged to service tax.
However few other questions arise after introduction of negative List.
FINALLY:
If Proper documentary evidence and records (all invoices) are maintained for expenses
incurred in behalf of Service recipient, then the service Tax may not be charged. However it
is advised to collect service Tax on reimbursements as a conservative approach.
RRA CONSULTANT
CAclubindia
