Urgent service tax query

Queries 718 views 6 replies

CA Adesh Gupta

Finance Manager

160 Points Joined January 2011

Hi friends, plz help me solve this very urgent issue on Service Tax

There is a company XYZ Inc registered in USA. XYZ Inc has to provide Certification service to HCL India on certain technical issues. To do all the working they appoint ABC ltd an Indian Company to do audit/investigation on their behalf and submit the report to XYZ Inc. ABC Ltd cannot sign the certificate themselves, certificates will be signed by USA Co only. Now the terms of payment are as under

XYZ Inc will not charge anything directly from HCL India. ABC Ltd will raise the invoice on HCL and charge the requisite fee which will be taxable under Business Auxillary Services and rate of Service Tax is 10%..

Now ABC Ltd will pay 25$ per certificate to XYZ Inc. on basis of invoice raised by XYZ Inc. NOW MY QUERY IS that under whuch head of taxable service will this payment by ABC Ltd to XYZ Inc fall and is there any requirement to deduct T.D.S on such payment ?

Replies (6)

CA Prabhat Gupta

Manager (Indirect Taxes)

821 Points Joined January 2011

Hope you are connected to ABC ltd. and are asking your query in relation to ABC limited. To my knowledge the services provided by the Foreign company are covered u/s 65 (105) (zzi), which states that: "taxable service" means any service provided or to be provided, to any person, by a technical inspection and certification agency, in relation to technical inspection and certification.

As far as TDS is concerned, it should be deducted u/s 195 as the payment is made to a Foreign company..

CA Adesh Gupta

Finance Manager

160 Points Joined January 2011

@ CA Prabhat Gupta- Yes i'm connected to ABC Ltd and Thnx for the reply, i was also thinking the same but was not sure

tell me 1 more thing, in this case are the provisions of DTAA i.e Article 7,14 and 15 are applicable or not?

CA Prabhat Gupta

Manager (Indirect Taxes)

821 Points Joined January 2011

As the service provider is a Non resident, you will have to pay service tax on reverse charge basis as provided in Rule 2 (1) (d) of Serive Tax Rules, 1994.

As regards your query on DTAA, let me first go through the articles in detail so that I could give you a correct reply.

CA Unnikrishnan Nair N

Chartered Accountant

2083 Points Joined February 2011

This is import of service in the hands of ABC Ltd taxable under Technical Testing . Regrding TDS I feel that it is not applicable if XYZ has no PE in India.

Deepa

...

62 Points Joined September 2011

can u guide me please in this situation? what is the penalty in service tax when no business started after obtain service tax registration number?
and also nil returns are not filled by the assesse form last 4 years (After obtaining registration number also no business is started)

U S Sharma

glidor@gmail.com

21063 Points Joined January 2010

Originally posted by : Deepa
	can u guide me please in this situation? what is the penalty in service tax when no business started after obtain service tax registration number? and also nil returns are not filled by the assesse form last 4 years (After obtaining registration number also no business is started)

on 1st hand , surrender the registration, stating that the company has no service tax business since registration.

day by day complicating the service tax penalties will make the life tough for defaulters, and for the persons who are not submitting the returns.

department will ask to regularize the returns on 1st visit, but submit the balance sheet copies with P.L accounts where no taxable service is provided, and on scurtiny department will do the needful, towards cancellation of RC