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Name :: Lathika

Your Country :: india

Question Title: :: Service Tax

Your Country :: india

Explain your question in detail :: 

Helo Sir, I will be grateful if you could give me clarification on the below stated
matter :

Mine is a Govt construction company

1. We have Managing Director, an IAS officer. For him company is paying - Travelling expense and Rent of accommodation as reimbursement. Will this attract Service tax liability to company under reverse charge
mechanism ?

Also please note - company is not paying salary or any other payments to MD since last 2 years , as he will get paid some other Govt organisation , as he has got additional charge of that org. too.

2.Company has board of directors , Who are Govt. nominees Company is paying Travelling allowance as cash to attend Annual General meeting and Board Meetings. Will this attract Service tax liability to company under reverse charge mechanism ?

Please clarify.

I am not able to establish Employer employee relationship. MD is almost our employee, even if he is entrusting many other responsibilities also. in various other govt organisations.

Please help.

Thanks in advance

Dear, you have asked good question. You are service receiver, you are liable to pay service tax whether service providers provide service to other party or govt. also. In your case, you are service receiver from MD and IAS, so, you need to pay service tax on any payment. But reimbursement of expenses is an extra case because your service provider has already paid service tax and he has taken total amount (service cost+service tax). So, you need not pay extra service tax.

 Important Point : If there is big need of service provider to pay the expenses for providing service, then you reimbursement, at that time, you will not pay service tax.

Let me explain with simple example

Suppose, I am accountant. I maintain the books of company of ABC on contract basis service of accounting. For this, I pay the internet bill with its service tax whose amount of Rs. 2000 including 14% service tax. Now, I take back these internet bill of Rs. 2000  from ABC company. So, ABC company need not pay extra 14% on this reimbursement because already service tax in it. 

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Accounting ! Answers: Service Tax on REIMBURSEMENT OF EXPENSES
Accounting ! Answers
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