Travelling expenses incurred outside India by on duty employee whether taxable?

[Yatin Bhopi]

Dear experts

We are MNC and our employees, directors, marketing persons regularly visiting abroad for official work (customer meet \ trainings \meetings with superiors). They spends on car hire, hotel accommodations, air travel. They pay these expenses from credit cards provided by our company or advances taken from company in cash.

Whether service tax is payable under reverse charge on such expenses incurred by employee abroad?

[Rajagopalan Ranganathan]

Sir,

According to Section 65 B (44) of finance Act, 1994 "service" means any activity carried out by a person for another for consideration, and includes a declared service. According to Section 66B of the Finance Act, 1994 there shall be levied a tax (hereinafter referred to as the service tax) at the rate of fourteen per cent on the value of all services, other than those services specified in the negative list, provided or agreed to be provided in the taxable territory by one person to another. In your case since the expenditure towards car hire, hotel accommodations, air travel are all taking place in a foreign country which is not taxable territory under Finance Act, 1994 you are not required to pay service tax on RCM basis. Service tax is payable on RCM basis only when the service is imported into India. This is my view.

[KASTURI SETHI]

Sh.Yatin Bhopi Ji,

I am also of the same views as expressed by Sh.Rajagopalan Ranganathan, an expert.

[Ganeshan Kalyani]

Sir, I agree with both the experts above. As a layman my view is that it is a pure reimbursement. Also company has not availed those services directly. It is the employee who enjoyed those facilities and paid for that. Thus there is no service availed by company and therefore no service tax. Thanks.

[CSSANJAY MALHOTRA]

Dear Mr. Yatin,

This is in addition to my friends views.

Services rendered by Employee to Employer during the course of employment is not taxable as is not covered under the definition of service under Section 65(b)(44).

[Ganeshan Kalyani]

Sir, my view as above is as a layman view. Legal answer is given by both the experts . Thanks.

[KASTURI SETHI]

Sh.Ganeshan Kalyani Ji,

Your views are entirely in letter and spirit of Service Tax law. Only style of expression is different.

[Ganeshan Kalyani]

Thank you Sir.

[Yatin Bhopi]

Thanks a lot for clearing the concept

[Ganeshan Kalyani]

Welcome Sir. Thanks.

AI Summary

Service tax on foreign employee expenses not leviable when services are consumed abroad and not imported into India. Expenses for car hire, hotel accommodation and air travel incurred and paid for outside India do not attract service tax because they are not provided in the taxable territory; reverse charge applies only where a service is imported into India. Reimbursements or payments made on behalf of employees do not convert those foreign-supplied services into taxable services provided in India, and services by employees to their employer in the course of employment are not treated as taxable services in this context.