We are manufacturer and availing services of our affiliate company located outside India. Being services are availed from affiliate company we are liable to pay service tax on book provision on reverse charge basis. When actual bill received in $ (USD) the payment is made higher than the provision made in the books, this is due to exchange variation. My query is: Are we liable to make service tax payment on differential amount?
Please note that $ (USD) amount is same while making provision and payment.
Please express your views
Service Tax Liability on Exchange Rate Variations: Calculate Based on Notified Rate Under Customs Act at Payment Date. A manufacturer inquires about the obligation to pay service tax on exchange rate variations when availing services from an affiliate company abroad. They note that the actual payment in USD exceeds the provision due to exchange rate changes. One respondent confirms the liability to pay service tax on such fluctuations and suggests seeking refunds if overpaid. Another respondent advises calculating service tax based on the exchange rate notified under the Customs Act on the date of payment, emphasizing that the liability should be accounted for when the expenditure is recorded, not when the invoice or payment is made. (AI Summary)
TaxTMI 
TaxTMI 
