Service tax on import of Service

[Guest]

Dear Sir,

We are a MNC manufacturing company our employees are coming from japan from deputation basis for period of three years and complete their period they returning to Japan. When they return to Japan they take some house Hold Goods from India to Japan and the freight bared by the Japan Organization further they raise invoice regarding the freight charges regarding the same and recovered from us.

My query is whether we are liable to pay the service tax on that payment or not ? Under Reverse Charge Mechanism.

Regards

Swapneswar Muduli

[Rajagopalan Ranganathan]

Sir,

When the Japanese workers are returning to Japan they take some house Hold Goods from India to Japan. This amount to export of household goods from India to Japan. Hence no service tax is payable on the freight paid by the Japanese organisation even though they collected the same from you.

[Akash Deep]

Dear Swapneswar,

This can never be the case of reverse charge. In this case japanese person has used the goods transportation services and the cost of such services on the first had is paid by the japnese organisation. later on such cost is recovered from you.

in this case you are only making reimbursement of money and no service has been received by you or your company. mere reimbursement of money is not a service. so no question of tax liability either i normal course or under reverse charge.

Further the place f provision of transporationn of goods services (i assume that goods were send to japan by air) and not by mail or courier. the palce of provisions of service shall be determined under Rule 10 of POP which is destination of goods i.e.e japan and out side india. so again no service tax liability.

Regards

Akash deep

[Guest]

Thank you very much very much both of you sir for clear clarification on above matter.

Regards

Swapmeswar

[DR.MARIAPPAN GOVINDARAJAN]

I am also cleared in this case.

[YAGAY andSUN]

Dear All,

As we understand this freight reimbursement has three parts, namely:-

1. Goods transported by Road from Japanese employees residence to Airport or Seaport.
2. Air Freight or Ocean Freight
3. Goods transported by Road from Japanese Airport or Seaport to Japanese Employee's residence.

Whether under GTA Service which were provided within India Service Tax are exempt?

Whether House Hold Goods are exempt?

What accounting treatment is being provided by the Indian Counterpart on this reimbursement of expenses?

Whether Reimbursement of Expenses are exempt from payment of Service Tax?

Please go through it and do some Brain Storming for further discussions.

Regards,

YAGAY and SUN

(Management, Business and Indirect Tax Consultants)

[Ganeshan Kalyani]

Merely reimbursement of expenses is also a taxable service w.e.f. 14.05.2015.

[Suryanarayana Sathineni]

I hope, the deputation from Japan to India from a foreign parent company or a subsidiary. There are plethora of decisions on reimbursement /payment of salaries but not come across any decisions on reimbursement of Transport expenses paid for the personal goods of such employees.

Further, it is also advisable to look in to the concept "Distinct person" introduced few years back under Service Tax before come to a conclusion. Of late the department is also raising demands on reimbursement of Branch expenses in case foreign Branches under reverse charge.

Regards

Surya

[KASTURI SETHI]

M/s.YAGAY AND SUN,

Dear Sir, With reference to your question asked above dated 24.1.16, I express my views question-wise on this issue as under:-

1. In this case GTA services provided within India (i.e. up to port in India) are not exempt.

2. At present House hold goods are not exempt from Service Tax on freight.

3. Answer to this question can be answered by MNC who has borne the freight.

4. Reimbursement of expenses are exempt from Service Tax only if Service Provider has provided service as 'PureAgent' defined under Rule 5 (2) (in Explanation-I ) of Service Tax (Determination of Value) Rules, 2006otherwise taxable in terms of Section 67 as amended So it varies from case to case.

AI Summary

Service tax on import of services: reimbursements for foreign employee freight typically not taxable where no service received in India Whether service tax applies to reimbursement of freight for household goods shipped by deputed foreign employees depends on who received the service and where it was provided. International carriage destined outside India is treated as provided outside India, so freight paid by the foreign organisation and recovered from the Indian affiliate is ordinarily not taxable or subject to reverse charge. Domestic legs of transport remain taxable in India, household goods freight is not exempt by default, and reimbursements may be taxable unless demonstrably paid as a pure agent.