Service Tax on Foreign Bond Issue

[Dibyendu Ghosh]

Subsidiary of the client has issued Bonds in foreign country. The proceeds of the issue has been utilised by the subsidiary. Further, repayment of the proceeds has been made by the subsidiary.

Service Tax Department is telling the Holding company to pay Service Tax under Full Reverse Charge on Issue related expenses. Contention of the Department is that as the guarantor is holding company, service tax has to be paid by the holding company.

Whether holding company is liable to pay Service Tax?

AI Summary

Place of provision determines service tax liability; guarantor status alone does not trigger reverse charge.
Service tax liability depends on the place of provision and the locations of provider and recipient: services used and enjoyed by the foreign subsidiary abroad are prima facie not taxable in India; guarantor status alone does not automatically make the holding company liable, absent default or a specific rule attributing liability to the guarantor.