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Demand of Service Tax under Reverse charge - on the amounts of Fees paid to US FDA and Other Regulatory Authorities - An analysis

Service Tax - By: - surya narayana - Dated:- 19-2-2016 - Dear Readers, Through this article, I am putting an effort to analyze various aspects involved in the issue and to justify that the amounts paid towards fees to US FDA for Inspection, approval and Product registration etc., are not liable for service tax under reverse charge since, they are only in the nature of Fees and the activity carried out by the US FDA is only to perform the statutory and sovereign functions entrusted to it under th .....

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ration in the Regulated Markets to market their products etc., To obtain the above certifications / approvals, Pharmaceutical companies need to submit the required applications with all the relevant details / documents along with the prescribed fees to the US FDA or the Regulatory Authority of the country as the case may be where the products are going to be registered etc., Upon receipt of the applications and scrutiny thereof, the US FDA or the Regulatory Authority of a particular country wher .....

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Authority in India (under Ministry of Health and Family Welfare) under the control of Drug Control General of India (DCGI) who is authorized under the Drugs and Cosmetics Act,1954 to carry out similar functions in India to issue licences, approvals , Registrations etc., for which certain amount of fees is being collected at the time of making the application by the companies. It is a known fact and settled principle that the activities carried out by these Authorities are statutory in Nature and .....

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y service providers abroad ( foreign Service Providers), the Service tax required to be paid by the recipient of service in India subject to the provisions of place of provision of services (68C) under Section 68(2) of the Finance Act,1994 as a person liable to pay service tax. The person liable to pay service Tax under the said section is on par with the Taxable service provider for the purposes of payment of Service Tax in the taxable territory and all provisions of the Act shall apply to such .....

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gative list which are not subject to payment of Service Tax. CBE&C vide Circular No. 89/7/2006-ST Dated 18.12.2006 clarified vide Para 2 & 3 that statutory or sovereign functions carried out by the Government or Government Bodies under constitution are not liable to Service Tax. The same was reiterated by the Board while consolidating the earlier clarifications vide circular 96/7/2007-ST Dated 23.08.2007. Departmental Allegations / contentions: Without considering the above provisions, t .....

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grounds: The services received by the Pharma companies from US FDA and other Regulatory Authorities are Taxable services since they are not covered under Negative list and squarely fall under the ambit of reverse charge in terms of Section 68(2) of the Finance Act,1994; The said services rendered by the Government of other countries covered under Non-Taxable territory and hence the recipient has to pay the Service Tax; Categorically stating that Government defined in the Act refers only Governm .....

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are sovereign in nature and not liable for service Tax and considered the TWO board circulars cited supra while deciding the cases. MAHARASHTRA INDUSTRIAL DEVELOPMENT CORPORATION Versus CCE, NASIK [2014 (11) TMI 311 - CESTAT MUMBAI] Roha Dyechem (P) Ltd. and Other Versus CCE [2012 (7) TMI 945 - CESTAT MUMBAI] UTI Technology Services Ltd. Versus Commissioner of Service Tax, Mumbai [2011 (11) TMI 220 - CESTAT, MUMBAI] IN RE : MYSORE CITY CORPORATION [2009 (10) TMI 667 - COMMISSIONER OF CENTRAL EX .....

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ommissioner of Service Tax, Mumbai [2012 (6) TMI 301 - CESTAT, MUMBAI ] TT. ENTERPRISES LTD. Versus COMMISSIONER OF CENTRAL EXCISE, BANGALORE [2009 (2) TMI 180 - CESTAT, BANGALORE ] Other points which are relevant to defend that the said services are sovereign in nature and not liable for S.T: In terms of Section 68(2) of the Finance Act, 1994, all the provisions of the Act is equally applicable to the person liable to pay service tax and the services of Government/Government Bodies are being co .....

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