Service tax applicability - supervision charges

[Guest]

Supervision Charges receivable from customer for 1 days rate Rs 2500/- for 1days. Total supervision charges RS 25000/- for 10 days receivable from customer & Travelling exps Rs 1500/-. (1) Supervision charges, inspection charges covered under Service tax Act? (2) If covered, under which catagory? (3) What about Travelling exps? service tax applicable or not?

[Ravi Chopra]

Supervision charges need to be looked into to ascertain the nature - is it consulting engineering service or something else. Supervision charges is paid to some expert who is technical and competent to ensure the quality and other aspects of the work. Alternatively, supervision charges may be related to any other activity with is taxable otherwise, like Management Consultant etc. Therefore, you need to look into the exact details of the nature of services being provided. Further, the travelling expenses incurred by such supervisor is not deductible from the gross value (i.e. the same should be included) where the service is found to be taxable.

[PRADEEP KUMAR]

We are manufacturer & material supplied to customer. During the erection, we have appointed one consultant or contract basis whinch name is franklin for supervision for erection. Franklin charged supervision exps on us & we have raised Debit Note for reimbusment of supervision charges to customer. (1) we have reimbusement of supervision charges, service tax applicable or not? if applicable, under which catagory? What about travelling exps? (2) If we appointed one employee & directly send to customer, we have charged for supervision in favour of customer, what about service tax on supervison exps and travelling exps? (3) if we have changes name of Deputation from supervison, what about service tax on Deputation & travelling exps?

AI Summary

Supervision charges taxability depends on service character; reimbursements and travel expenses form part of gross value and may be taxable. Taxability of supervision, inspection and related charges depends on the substantive nature of the services. Third party supervision and associated travel reimbursements must be included in the gross value when the underlying service is taxable. Deploying an employee or labeling the supply as deputation can alter the character of the supply and may itself be taxable; nomenclature changes do not affect the substantive tax analysis.