Service tax paid on Registration expenses overseas and Sales promotion Expenses.

[Sunil Jagtap]

Dear Experts,

My query relates to take credit of the service tax paid on Registration expenses overseas and Sales promotion Expenses overseas.

We are a manufacturing unit, we are paying service tax 14% on amount paid to our overseas agent for registration of new products in market and Sales promotion expenses.

Now my query is are we eligible to take credit of service tax paid.

Regards

[Rajagopalan Ranganathan]

Sir,

As per rule 9 (c) of "Place of Provision of Services Rules, 2012, the place of provision of "intermediary service" is the location of service provider.

As per rule 2 (f) of the same rules, “intermediary" means a broker, an agent or any other person, by whatever name called, who arranges or facilitates a provision of a service (hereinafter called the 'main' service) or a supply of goods, between two or more persons, but does not include a person who provides the main service or supplies the goods on his account. The service provided by an intermediary is intermediary service.

Since your agent is located in non-taxable territory (foreign country) no service tax is payable in India in respect of service provided in non-taxable territory. Therefore you need not pay any service tax on amount paid to your overseas agent for registration of new products in market and Sales promotion expenses.

I will advise you not to take credit of service tax paid by you since the Department may object that you need not pay service tax on the amount paid to your overseas agent and credit availed by you is wrong credit. You may claim the refund of service tax paid as tax paid without authority of law and the doctrine of unjust enrichment is not applicable since you have paid the tax under reverse charge mechanism and you have not passed on the tax to any other person. If you have already taken the credit please reverse the same to avoid any audit objection/litigation in future.

[Akash Deep]

Dear Sir,

This is my personal view that situation as explained in query is not where intermediary service is being provided. as per my understanding amount are paid to a person Situated in foreign country who is helping out querist or registering querits's product in foreing country. Here that person is not facilitatiing the provision of service or sale of goods between two persons. i can see only two person here. however in case of intermediary there have to be three persons, one main service provider, second main service receiver and third intermediary who facilitate the provisions of service between main service provider and main service receiver. to me this is a simple case of import of services, and credit of service tax paid on such services can be taken by the service receiver.

you can take credit of service tax paid.

[KASTURI SETHI]

Sh.Sunil Jagtap Ji,

Yes. It is import of service only. I fully agree with Sh.Akash Deep, Expert.

[Ganeshan Kalyani]

Do you mean to say that the provision referred by Sri Rajagopalan is incorrect in this issue. Does the highlighted word in his reply is not correct. Expecting revert from both.

[KASTURI SETHI]

Sh.Ganeshan Kalyani Ji,

Sir, I shall not say someone is right or someone is wrong. It is exchange of views for fool-proof advice to the querist as well as enrichment of our knowledge also. I have endorsed Sh.Akash Deep's views after going through the reply carefully and not acted on impulse. I may also be wrong but supported the views what I thought proper in law. I also read reply yesterday but did not respond. I wanted time to ponder over the issue. In the meantime, Sh.Akash Deep expressed his views and these views were brewing in mind. Hence I clicked on the spot. Further I want to discuss as under:-

Where is the third person ? Third person is not in picture. Note the last line of the definition of, "Intermediary" which is as under:

"------but does not include a person who provides the main service or supplies the goods on his account."

(Emphasis is supplied on "on his account"

Rule 3 of Place of Provision of Services Rules, 2012 is applicable here. Place of provision is location of SR. SP is in non-taxable territory and SR is in taxable territory and a business entity. It being import of service, SR is covered at Serial No.10 of Notification No.30/12-ST dated 20.6.12 as amended. Hence he manufacturer (SR) can take credit.

All of us do not know the terms and conditions of agreement, if any. Terms and conditions can change the whole scenario. I also welcome the views of other experts.

[Akash Deep]

Dear Kalyani Ji,

if you take note of the opening words of my reply it says, "in my personal view". i am no one to judge any body as i am not getting paid either by TMI or by Mr. Snil Jagtapi. i do not make much efforts when i am not getting paid. so please do not take a me as if i write any thing just to prove wrong some body. i am a very materialistic man and will not make any effort to endorse any body as right or wrong untill i get paid for doing that. i am a lawyer and that is my business. i put my all efforts to to prove wrong only one person and that is department of revenue and certainly not my friends including ranganathan ji on this forum.

Again views expressed are STRICTLY PERSONAL and always open for views of other experts. as a lawyer i am aware of many landmark jugdements incluing L&T on works contract where minority view in earlier judgments becomes the final law of the land.

i wanted to right about the last line of definition of intermediary services (thanks to kasturi ji) but was feeling lazy.

[KASTURI SETHI]

Frank, clear, sincere and professional approach by Sh.Akash Deep, Expert. You mean to say, " If I do not watch my interest, who will watch my interest." Naturally, first of all I shall be selfish to myself thereafter comes society. It also means I cannot look after the interest of others at my cost.

I have inferred the essence of Sh.Akash Deep's personal views about his profession.

[Akash Deep]

Dear Kasturi ji,

All i want to convey is that if i have to prove some body wrong i have to give reasons and its hard work which i dont do without getting paid. I never start my submissions with an intention to prove any body wrong. i start my submission with an intention to convince other what is correct as per my limited understanding of law. I only put my views in front of other experts, rest is up to them whether they find it correct or not.

[Ganeshan Kalyani]

There is nothing personal in this forum. My question was to get your views as to how you justify your reply. This is not that I am trying to find who is right or wrong. Five fingers are not same. I hope we should conclude this now. Thanks.

[KASTURI SETHI]

Agreed with Sh.Akash Deep's views dated 25.2.2016 and Sh.Ganeshan Kalyani's views dated 26.2.2016. Everybody has one's own working style and that cannot be objected to.

AI Summary

Import of services: credit may be available for overseas registration and promotion services when treated as imported services. Availability of service tax credit for payments to an overseas agent depends on whether the service is an intermediary service (place of provision at provider's location, no Indian tax payable and no credit) or an import of services (place of provision at recipient's location, Indian recipient may claim credit). Factual terms of the engagement affect characterization; taxpayers who have claimed credit may face departmental objections and may need to reverse credit or seek refund where tax was paid without authority.