Payment of Service Tax by Branch

[Guest]

An company having 20 branches with seperate service tax registration for all the branches. Some expense's which are commonly incurred for all branches say manpower supply, which is governed under RCM are paid by the head office which is not a Input Service Distributor. The invoice received is in the name of Head office finding reference of all branches. Head office pays the service tax liability on the total invoice under RCM . There after the head office transfers the expenses to all branches proportionately. It doesnt transfer the service tax amount paid by it.

Will the above transaction be deemed as shifting of liability of tax. Is this correct under service tax?

[Ganeshan Kalyani]

Sir, what I understand is that you are paying service tax centrally for the service availed at respective locations as the bill is received in HO address. Further for accounting purpose you are debiting the proportionate expense to the respective locations. This is requirement as per Accounting Standards. The accounting does not impact service tax liability. Thanks.

[Guest]

Department is saying that there is shifting of liability which is wrong.

[Ganeshan Kalyani]

Sir, as far as you are correctly discharging your service tax liability there is no issue. You should re-check and convince the department. Thanks.

[KASTURI SETHI]

Sh.Vinay Jhawar Ji,

I fully endorse the views dated 22.6.2016 and 23.6.2016 of Sh.Ganeshan Kalyani, Sir. Where is revenue loss or procedure lapse in the eyes of Service Tax law ? The department is concerned with the correct and true payment of Service Tax.

However, it is suggested that either you should get Centralised Registration or get your Head Office registered as Input Service Distributor. Keeping in view of changes in Budget, 2016 regarding ISD, it is better to get your H.O. registered as ISD. It will be convenient and safe for future.

[Ganeshan Kalyani]

Sir, hope your query is resolved. Thanks.

AI Summary

Company's Head Office Pays Service Tax Under RCM; Consider Centralized Registration or ISD Status for Compliance. A company with 20 branches, each having separate service tax registration, incurs common expenses like manpower supply, governed under Reverse Charge Mechanism (RCM), paid by the head office. The head office, not an Input Service Distributor (ISD), pays the service tax on the total invoice and proportionately transfers the expenses, excluding the service tax, to branches. Concerns were raised about shifting tax liability. Responses clarified that as long as the service tax is correctly paid, there is no issue. Suggestions included obtaining centralized registration or registering the head office as an ISD for compliance and convenience.