Employees sent on deputation to subsidiary/ associate companies (Service Tax)

[Guest]

Dear Sir,

Please advise us regarding Service Tax chargeability on Deputation of the employees to the Subsidiary company. The employees were send to the subsidiary/ associate companies in Nepal on deputation. Recovering costs on actual basis and were not retaining any amount out of the payment to the subsidiary/ associate companies. These recovered costs were in the nature of salary and other costs of the employees.

Hence please advise whether Service Tax will be liable to be paid by us under such circumstances.Thanks and regards.

[YAGAY andSUN]

No Service tax liability shall occur since such there is a settle legal position in this regard.

[Sanketh Meri]

This is a settled legal position with various judicial precedents favoring the assessee. No service tax is liable.

[Rajagopalan Ranganathan]

Sir,

Since you are recovering costs which were in the nature of salary and other costs of the employees and you are not charging any extra amount for deputing the employees to your associate company in Nepal deputation of employees by you cannot be defined as 'service provided'. Further there is no relation ship of service provider and service receiver since the company in Nepal is your associate company. Therefore, in my view, you need not pay any service tax since deputation of employees cannot be treated as supply of manpower service.

[Vijay Chitte]

It is doubtful, if of all the legal settled positions will apply after 01.07.2012, as the earlier definitions are now not relevant. As per my view, whatever take decision, inform to the department to avoid other legal penal actions.

[KASTURI SETHI]

Sh.Shinde Ji,

In support of the views of Sh.Ranganathan, Sir, a case law is appended below, especially, Para No.7.2 is very very relevant.Period is prior to 1.7.12. Even then it has force.

2016 (42) S.T.R. 1057 (Tri. - Mumbai) = 2016 (4) TMI 496 - CESTAT MUMBAIFRANCO INDIAN PHARMACEUTICAL (P) LTD. Versus COMMR. OF S.T., MUMBAI

[KASTURI SETHI]

2016 (41) S.T.R. 542 (Tri. - Mumbai)= 2015 (8) TMI 545 - CESTAT MUMBAILARSEN & TOUBRO LTD. Versus COMMISSIONER OF SERVICE TAX, MUMBAI-II

[Ganeshan Kalyani]

Sir, service tax is not applicable on the amount recovered from sister concern toward deputation of employer. There are plethora of judgment which states that by disputing the employee to sister concern there is not service rendered as such and also there is absence of consideration. The case laws referred by Sri Kasturi Sir is all in favour. Thanks.

AI Summary

Deputation of employees not a taxable service when only actual salary and costs are recovered, absent any markup or service relation. Deputation of employees to subsidiary or associate companies where only actual salary and related costs are recovered without any markup is not treated as a taxable service; established precedents find no service relationship or consideration, so such recoveries are treated as reimbursements rather than supply of manpower, though applicability of earlier decisions to later legislative changes should be verified.