TaxTMI 
TaxTMI 
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?
Applicability of service tax
04 Feb 2009 
2 Replies 
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Service tax on intra group reimbursements: reimbursements are taxable when a notified service is rendered between related companies.
Service tax does not apply to pure reimbursements absent a provision of a notified service; where one group company renders a notified service to another, reimbursements and recovered charges form part of the taxable value. Structured intercompany billing, centralized service provision, or large charges may attract tax; mitigation can include cost sharing arrangements or direct employee payments. A cited decision involving services to sister concerns treated such recoveries as taxable, generating significant tax demands and penalties. (AI Summary)
Service tax does not apply to pure reimbursements absent a provision of a notified service; where one group company renders a notified service to another, reimbursements and recovered charges form part of the taxable value. Structured intercompany billing, centralized service provision, or large charges may attract tax; mitigation can include cost sharing arrangements or direct employee payments. A cited decision involving services to sister concerns treated such recoveries as taxable, generating significant tax demands and penalties. (AI Summary)