Budgetory Changes w.r.t. PPS Rule 2012, proposed w.e.f. 01/10/2014

[Vinay Kunte]

What will be the effect of the proposed changes in Rule 2 and effective to Rule 9(c) of Place of Provision of Service Rules 2012, vide Notification No. 14/2014, on the working cost with margin received by Indian Subsidiaries for running the business in India from their foreign parent companies? Even if they are not working as commission agent but involved in trading of goods of the parent companies? Will the entire reimbursement come into the tax net or the export of service benefit will continue to be available?

AI Summary

Proposed Changes to Place of Provision of Service Rules 2012 May Affect Indian Subsidiaries' Tax on Foreign Reimbursements A discussion on proposed changes to the Place of Provision of Service Rules 2012, effective from October 1, 2014, explores their impact on Indian subsidiaries receiving margins from foreign parent companies. The main concern is whether these changes will subject reimbursements to service tax or if the export of service benefit will remain applicable. One participant opines that subsidiaries involved in trading goods for parent companies are not subject to the tax, whereas those earning commissions by connecting buyers to the parent companies would be affected by the proposed changes.