Services received in india

[Guest]

We are manufacturer of Automobile parts and we plan to expand our manufacturing facility in this regard we are importing machinery from outside Inda and technical services on the macine operating will  be provoded by manufacturer itself. Will it attract service tax in India, if so from whom we can claim the same

Thanks

K Hariharan

[Guest]

Please refer to Section 66(A) of Finance Act, 2006 wherein it is mentioned that taxable services provided by a person abroad to a recipient in India has been made taxable and the Indian recipient is liable to pay service tax in such cases.

Service Tax payable under reverse charge mechanism on Technical services provided by the foreign service provider.  The same is eligible as input service and such service can not be treated as an out put service for the purpose of availment of credit (refer Rule 5 of the Taxation of services Rules, 2006)

With Regards,

Allada Ravindra Babu

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[NEERAJ KUMAR, RANCHI]

If the supplier of goods charge money for providing you technical service it will definitely attract service tax and only you will be liable to pay service tax and no one else and you can not  take Cenat Credit of that amount. Refer to Section 66A of the Finance Act, 1996. 

[sv bhasker]

Sir ,

It appears you take technical know how services from foreign service provider. You have to pay service tax under IPR services under Section 66A read with Taxation of Services (provided from Outside India and received in india) Rules, 2006 by paying in cash. However, you can take cenvat credit basing on the challan considering technical know how service as input service. 

[rajkumar shukla]

From the query ,it is not clear as to where the services can be classified.nontheless service tax is leviable and also available as credit

[NK SHETE]

One of the expert opines cenvat credit cannot be availed whereas another opines opposite. I for one stand with second opinion. -

Shete

[rajkumar shukla]

KINDLY ELUCIDATE WHY CREDIT CAN NOT BE TAKEN.SERVICE TAX LEVIABLE UNDER SECTION 66A HAS BEEN ALLOWED AS CREDIT WEF 18/04/2006 BY SECTION 71 OF FINANCE ACT 2011.

[NEERAJ KUMAR, RANCHI]

with reference to my reply on the subject, I wish to partly correct my self, You can not utilise cenvat credit for payment of your tax liability but to pay by cash, however after such payment the same will be available for cenvat credit.

AI Summary

Reverse charge on foreign technical services: Indian recipient must pay tax in cash but may claim cenvat credit afterward. Imported technical or know how services are taxable under the reverse charge mechanism, making the Indian recipient liable to pay service tax (in cash where prescribed). The tax paid under reverse charge is treated as an input service eligible for cenvat credit, but cenvat credit cannot be used to discharge the reverse charge payment; credit may be claimed after cash payment.