Remibursement of Expenses

[CABIJENDERKUMAR BANSAL]

Dear All,

Our company is joint venture company associated with Japan.

A Service Agreement is to be executed between both company that Japan Company will provide technical support to Indian JV Company . No cost will be charges for it.

They will send 2 Japanese Technical person to India for providing Technical Support. To whom Indian Company will give Rs. 2 Lac for their monthly expense.
These expenses will be reimbursed to Indian company by Japanese Company. I.e No impact on Profit & Loss of Indian company.

Our query is that whether there is tax liability in case of giving advance to Japanese technical persona and  getting reimbursement of these expense from Japan. Whether TDS or Service tax on Reverse mechanism will be apply to these reimbursement transactions.

Thanks in advance.

[YAGAY andSUN]

Dear Bijender,

Please check the Intercontinental judgment in this regard.

Regards,

Team YAGAY & SUN

(Management & Indirect Tax Consultants)

[CABIJENDERKUMAR BANSAL]

Dear Sir,

Thanks for your feedback.

Intercontinental Judgment suggested by you  regarding Service Tax is clear the doubt that there is no service tax liability on reimbursement of exp.

Whether there is any liability regarding TDS or any compliance related to FEMA.

Regards

CA. B.K.Bansal

[Guest]

Our understanding on above issue is as under:

1. ₹ 2 lakhs paid to 2 Japanese Technical person which are not registered under the service tax.
2. This ₹ 2. lakhs gets reimbursed from Janpanes Company. The Janpanes Co. can be treated as Pure Agent subject to the service agreement clauses.
3. The amount paid in India to Japanese Technical person are taxable on reverse charge basis since the service rendered by Japanese in India and consumed by Indian JV Co.
4. Since service rendered and consumed in India ST is applicable and service receiver is liable to pay the same.
5. We do not know the Intercontinental judgment and facts of the juddgment.

C.N. Kate

[Yatin Bhopi]

Pl. share your knowledge about Intercontinental judgment

AI Summary

Service tax on reimbursements may hinge on pure agent characterization and reverse charge applicability for overseas technical personnel. Whether reimbursements by an Indian JV to foreign technical personnel and subsequent reimbursement by the foreign parent are taxable or non-taxable depends on characterization: payments may be treated as non-taxable reimbursements if the foreign company is a pure agent, as suggested by a cited Intercontinental decision, or as taxable consideration if services are rendered in India and consumed by the JV, attracting service tax under the reverse charge mechanism. Separate uncertainty exists about TDS obligations and FEMA compliance on advances and reimbursements.