Service Tax payment on exchange variation, Service Tax

[Yatin Bhopi]

We are manufacturer and availing services of our affiliate company located outside India. Being services are availed from affiliate company we are liable to pay service tax on book provision on reverse charge basis. When actual bill received in $ (USD) the payment is made higher than the provision made in the books, this is due to exchange variation. My query is:  Are we liable to make service tax payment on differential amount?

Please note that $ (USD) amount is same while making provision and payment.

Please express your views

Posts / Replies

[Pradeep Khatri]

Dear Yatin,

Yes, you are liable to pay service tax on such fluctuations in exchange rates and vice versa you may claim refund or adjust it accordingly, if paid in excess on the basis of provisions made but exchange rate fluctuation are South bound.

Regards,

Team YAGAY & SUN

(Indirect Tax & Management Consultants)

[Umayal Palaniappan]

In the case of service tax when the tax liability is discharged for an import of service under the reverse charge you are liable to calculate the service tax liability has to be calculated by considering the exchange rate in force as notified under the customs Act as on the date of payment. However, in your case being the amount payable is for the group company (associate enterprise) the ST liability has to be discharged while accounting the provisions in the books. Even in such cases you need to consider only the rate as notified under the customs Act as on date of accounting the expenditure in your books. Need not bother on the rates at the time of accounting the invoice or the payments.