ST on advance given by wholly subsidiary company to Holding subsidiary

[Guest]

Hello Sir,

I would like to know that whether Service tax shall be liable if some advance has been given by Wholly owned subsidiary company to Holding company ?

the nature of advance would be incurred the same on business operative expenses.

[KASTURI SETHI]

Only money transaction is not liable to Service Tax. Such transaction is out of definition of 'Service' in terms of Section 65 B(44)(a)(iii) of the Finance Act,1994.

[Ganeshan Kalyani]

I agree with Sri Kasturi Sir, only advance given will not be termed as service being provided. No service tax on advance given. Thanks.

[Suryanarayana Sathineni]

Dear friend,

I do not think the said amount is treated as advance but at the most can be considered as a loan because generally, the advance is paid/given with regard to a purchase or in terms any contract etc.,

Though prima facie it appears a transaction in money, the taxability would depend on the context in which this transaction of money took place.

Regards

Suryanarayana

[Ganeshan Kalyani]

Sir I agree this could be loan given in place of advance. Advance would be against any work which is to be performed in near future. In that case service tax may become applicable. thus the querist should further elaborate his query so that experts can further write their replies. Thanks.

[KASTURI SETHI]

Agreed with Sh.Surya Narayan, Sir and Sh.Ganeshan Kalyani, Sir too. The nature of advance is to be utilised for 'Business Operative Expenses" by the Holding Company. So this aspect can go to any direction---Taxable or non-taxable. In a nutshell, all the replies are valuable for the querist.

AI Summary

Service tax on advances: taxability depends on whether the payment is a mere money transfer or consideration for services. Taxability of funds from a wholly owned subsidiary to its holding company depends on whether the transfer is a bare money transaction or consideration for work. Pure monetary transfers not serving as consideration fall outside the definition of service and are generally not taxable, whereas advances tied to future contractual performance may attract service tax; the factual context and legal characterisation determine the outcome.