Applicability of service tax

[Suhit Aggarwal]

Sometimes companies incurr expenditures for other companies of same group or for its subsidiaries and recover this later on with or without markup. Is service tax applicable on these transactions. If yes, then at what value?

AI Summary

Reimbursements for Group Entity Services May Attract Service Tax if Notified Service is Rendered, RPG Enterprises Case Highlights A query was raised about the applicability of service tax on expenditures incurred by companies for their group entities or subsidiaries, which are later reimbursed. One response clarified that service tax applies only if a notified service is rendered, making reimbursements part of the service bill. Without a service provider-recipient relationship, service tax is not applicable. Another response suggested sharing services for mutual benefit and cost reduction, noting that significant reimbursements could attract service tax. A case involving RPG Enterprises was referenced, where services rendered to sister concerns were deemed taxable, leading to a substantial tax demand.