Associated Enterprises

[Pradeep Jain]

Dear Sir,

We have been provided design and Drawing by our Customer for manufacturing of Final product. Paying royalty thereon . At the time of year end we take provision of royalty payable . Service Tax is paid at the time of payment of Royalty .

Department view is that the said party is covered under Associated Enterprises as per section 92A of Income Tax . As associated Enterprises has the same meaning in ST as assigned in IT. Hence service tax is payable at the time of provision of service not at the time of payment.

Please give your kind advise.

Regards

Pradeep Jain

[VINOD KUMAR]

Dear Sir please provide the following information for correct reply:-1. Description/name of service. 2. Location of service provider. 3. Date of payment of value of service. Thanks

[Pradeep Jain]

Dear Sir,

Thanks for quick response. As desired details are as under:-

Description of Service - Royalty

Location of Service Provider :- USA

Date of payment of Service :- 3-4 month from the date of provision. Going on Since 2010-11

Regards

Pradeep

[VINOD KUMAR]

Dear sir associated enterprise has the same meaning as given in section 92A of IT Act. But as per rule 7 of POTR 2011, service tax is required to be paid at the time of payment of service value.

[VINOD KUMAR]

Dear Sir. To avoid any dispute it is advisable that the payment of service value may be made within three months (6 months up to 30-9-2014).

AI Summary

Associated enterprise service tax timing: payment generally triggers liability under POTR rule 7, so align payments with POTR windows. Rule 7 of the Point Of Taxation Rules, 2011 links service tax liability for royalty payments to the time of payment/receipt of value; thus, where the recipient is an associated enterprise as defined in section 92A of the Income Tax Act, tax is treated as exigible on payment rather than on accrual, and it is advisable to effect payment within the prescribed POTR payment window to avoid disputes.