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

Japanese Company Provides Free Technical Support in India; Tax Implications Under Reverse Charge Mechanism Explored. A joint venture company in India, associated with a Japanese company, plans to execute a Service Agreement where the Japanese company will provide technical support without charging costs. Two Japanese technicians will be sent to India, and the Indian company will cover their monthly expenses of Rs. 2 lakh, which will be reimbursed by the Japanese company. The query concerns whether there is any tax liability, such as TDS or service tax under the reverse charge mechanism, on these transactions. Responses suggest checking the Intercontinental judgment for guidance on service tax liability, with some indicating that service tax applies under the reverse charge mechanism.