Applicability of service tax, Service Tax

[Suhit Aggarwal]

Sometimes companies incurr expenditures for other companies of same group or for its subsidiaries and recover this later on with or without markup. Is service tax applicable on these transactions. If yes, then at what value?

Posts / Replies

[Rajesh Mittal]

No this is a reimbusemtn of exepses only. Service tax is applicable only when one company has rdered some notified service to other. in that case all the reimbursements will also part of of service bill and subject to service tax. When there is no relation ship of service provider and recipant is there no service tax applicablity is there.

[D.K.KOTHARI]

Better course is sharing of services for mutual benefit and at reduced overall cost. Direct payment to employes is preferable. In case there are major billing even if for reimbursement, the St can be demanded. It is not necessary that a service provideer should make profit. Please refer to case of RPG Enterprises decided by CESTAT and availabel on this website. RPG rendered services to sister concerns, there it was held that there ws service rpovider and receiver, there can be one or few clients. service received by CESC was taxable. Huge demand for tax an penalty was raised.