Service Tax CENVAT Credit and Reversal in case of Abroad

[Pradeep Jain]

Dear Sir,

1. We have taken legal services in India for setting up joint venture abroad. The service provider has raised invoice to the Indian Company. Under reverse mechanism system of Service Tax Act, we have paid service tax on this service.
2. Further, we have hired Indian manpower recruitment consultant in India to recruit manpower abroad for our new joint venture company. The service provider has raised invoice with service tax at the rate of 12.36 percent to Indian company.

Our query:

1. Whether the Indian Company is entitled to avail cenvat credit of service tax paid for the point number 1 and 2 above?
2. We have to seek reimbursement of above expenses from new joint venture company existed outside India, which has no legal entity in India. Whether the Indian Company need to charge any service tax at the time of raising reimbursement invoice /debit note? Or do we need to reverse the service tax credit if availed (as per point no. a) above) while raising reimbursement invoice / debit memo?

Regards

Pradeep Jain

[Brijesh Verma]

1. Yes you can definitely avail cenvat credit in india. However, the Cenvat Credit pertains to JV Business which shall be set up outside India and consequently, in our view the JV would not have any usefullness of this CENVAT. 

2. If there is any "PURE AGENT" agreement between indian co. and JV outside india, then no tax on reimbursement would apply.

AI Summary

Cenvat credit entitlement for taxable services procured in India can be claimed; pure agent reimbursements may be non-taxable. Indian company may avail CENVAT credit for service tax paid on legal and recruitment services procured in India for setting up a foreign joint venture. That CENVAT will relate to the JV business abroad and may therefore be of limited practical use to the Indian entity. If reimbursements to the overseas JV qualify under a pure agent agreement, those reimbursements would not attract service tax.