Payment of service tax on reversed charge method -Reg

[vinay wakde]

Some of our top Executives are visiting foreign countries for business purposes. The travel & other expenses incurred by them are booked under head “Foreign Travel” in the books of accounts. During the Excise Audit, we have been asked to pay Service Tax  on expenses done by the Executives in foreign country on reversed charge method. 

Kindly let us know whether said expenses are covered for payment of Service Tax under Section 66A?

Regards,

VINAY

 

[YAGAY and SUN]

This needs to check the material facts.  If possible, kindly provide us the scanned copy of the audit objection on [email protected] to enable us to revert soon.

 

[RadheyShyam Mangal]

Kindly  note that service to self is not taxable. However if such service is received from your company's branch office abroad, it might get covered as per Explanation to Section 66A of Finance Act, 1994,. Though I don ot have full facts, but  prima facie, the expenditure on foreign travelling like boarding and lodging are not taxable in your case. Pl give me the Audit Para on my mail, then I can give my final opinion.

regards,

CA R S Mangal 

[Vijay kumar]

Dear Sir, For foreign travel, the air travel agent would have already charged you service tax under the "Air travel agent" service. Further, the service provider is in India and hence reverse charge mechanism does not come into picture. The other expense would be accommodation abroad, which is covered under "short term accommodation" service taxable w.e.f. 1.5.2011. However since it is covered under Rule 3(i) of the Taxable services (Provided from outside India and received in India) Rules, 2006 and in which case the hotel is located aborad, there is no liability on you u/s 66A. Thus, it seems that part of the expenses have already suffered the tax and the other part is not taxable. There is a general misconception in the Department that every expenditure booked, particularly in FC is liable to service tax under the reverse charge mechanism. Hence you may present your case on facts on the above lines. If the facts are different, please let me know. Regards - Vijay Kumar.

AI Summary

Reverse charge liability for foreign travel hinges on provider location and whether services were taxed at source.
Whether travel and related expenses incurred abroad by company executives attract reverse charge depends on the service's nature and source. Air travel is generally taxed under the air travel agent service when provided by an Indian agent; foreign accommodation is classed as short term accommodation but, if provided by a hotel located abroad under the provisions for services provided from outside India, it does not create a reverse charge under Section 66A. Services from an overseas branch may raise different issues under the Explanation to Section 66A, so factual details are necessary to determine liability.