Applicability of Service tax registration

[Bakul Gandhi]

What is the difference between a Project Office and Branch under F.E.M.A? I feel that Project office is for a specific Contract and it is set up for assisting foreign company in executing the project. Since the project office has an fixed establishment in India, will it require to get registered under Service Tax? And if it is registered under Service TAx and does billing in respect of the project, then what is the difference between project office doing business in India and branch doing business in India?

[Guest]

A foreign enterprise or entity can set up business operations in India either as (a) an Incorporated Entity or (b) as an Unincorporated Entity.An A Foreign Company can operate in India as an Unincorporated Entity in the form of a liaison/representative office, or a Branch office, or a Project office. Opening of such offices is governed by the Foreign Exchange Management Regulations, 2000, which places restrictions on the activities and operation of such offices.With particular reference to project office and branch office, the details are as under: A Project office cannot undertake or carry on any activity other than the activity relating and incidental to execution of the concerned project. Branch offices are also not allowed to carry on manufacturing, processing and retail trading activities of any nature in India.A branch office can represent the parent company in India, act as buying/selling agent in India and is authorized to Export and Import goods. A branch offices can, however, acquire immovable properties in India, which is/are necessary for or incidental to carrying on the activities thereof. Hence as you may see, the essential difference between the two forms is self explanatory. Like for instance the project office cannot undertake Import and export business or it cannot acquire an immovable propety etc. If the activities of the project office is covered within the defintion of taxable services under the service tax act, it will be requried to get registered under the Service Tax Act, may be as a service provider or as a servicer receiver liable to make payment of service tax. To your query as mentioned in the last part, take not that the project office is doing billing only in respet of the concerned project whereas, the branch office may be doing billing in the course of export of goods, billing in the process of acting as buying/selling agent etc.

AI Summary

Service tax registration: project offices must register if activities constitute taxable services and branches differ in permitted activities and billing. A Project office may only perform activities incidental to the specific project and is restricted from import/export and acquiring immovable property, while a Branch office may represent the parent company, act as buying/selling agent, import and export goods, and acquire immovable property necessary for its activities. If activities of a project office fall within the definition of taxable services, it must register and comply under the Service Tax Act either as a service provider or as a service receiver liable to pay service tax.