Taking and paying against services taken from a supplier

[Guest]

Hi, my firm is registered as a trading unit and hence only has VAT & CST TIN numbers. Since its a startup I am depending on few free lancers for various services (for example, portion of marketing activities and accountings). The problem here is how to accommodate the concerned expenses which most of the times is the service fee to the service rendering party.

The party rendering services to my firm could be free lancers (that means even they would not be having any service tax registration) or it could be a service rendering firm (with all the necessary registartions)

expert guidance is required.

Thanks ​​

[KASTURI SETHI]

I think the words mentioned in third line are 'Service Free' in stead of 'service fee'. If there is no consideration, such service is out of the gamut of the definition of 'Service' as per Section 65 B(44) of the Finance Act.Moreover, no service tax is leviable for threshold limit of Rs.Ten Lakhs.

Regarding how to accommodate the expenses can be best guided by the C.A. or other experts in this forum.

[Ganeshan Kalyani]

An assesse having business income is supposed to prepare Balance sheet, Profit and Loss account, Cash account, Bank account, Capital account etc. to maintain proper accounting for the purpose of return filing and various other purposes. However, a practicing CA would guide to correctly with keeping in mind your business activities. Thanks.

[Ganeshan Kalyani]

An assesse having business income is supposed to prepare Balance sheet, Profit and Loss account, Cash account, Bank account, Capital account etc. to maintain proper accounting for the purpose of return filing and various other purposes. However, a practicing CA would guide you correctly keeping in mind your business activities. Thanks.

AI Summary

Service tax treatment of payments to freelancers hinges on consideration and registration status, with accounting advised by a CA. Payments to independent contractors and freelancers require assessment of whether the transaction constitutes a taxable service (consideration requirement) and whether the supplier is liable to register; supplies without consideration or below the statutory registration threshold do not attract service tax. The firm must nevertheless record such payments properly in its financial statements and obtain professional accounting advice on classification and compliance.