Service Tax on Expenses Incurred By Foreign Holding Company and Recovered from Subsidiary Company in India

[HImanshu Singh]

There is a subsidiary in India and its foreign holding company located in UK. Now subsidiary is incurring different cost for holding company such as
– ERP Software development done by foreign Company
– buying air tickets for the holding company personnel travelling to India for the project of holding company.
– Incurring legal expenses for the holding company
– incurring advertisement expenses for the holding company

In all the above expenses there is no profit margin in reimbursement invoice raised.

Subsidiary Company is Just Paying its Share on the Expenses and Booking those Expenses in PL

What is the Liability of Service Tax on Such Expenses incurred by Foreign Company.

[Ganeshan Kalyani]

In my view service tax is applicable.

AI Summary

Service tax applies to reimbursements for costs incurred by a subsidiary and recovered from its foreign holding company.
The document presents a fact pattern where an Indian subsidiary pays for services and expenses on behalf of its foreign holding company (ERP development, air travel, legal and advertising) and recovers those amounts without markup, booking them in profit and loss; the recorded advisory conclusion is that service tax is applicable to those reimbursements.