• Service: Tax, Global Indirect Tax, Global Mobility Services, Global Compliance Management Services, International Tax
  • Type: Regulatory update
  • Date: 3/14/2014

India - Service tax on offshore services; R&D expense claims 

March 14:  The KPMG member firm in India has prepared reports on the following developments (read the February and March 2014 reports by clicking on the hyperlinks provided below):
  • Service tax on services received and consumed abroad - In the IT industry, it is not an uncommon arrangement to render on-site services to overseas clients through the sub-contractors / branch offices located outside India. In such situations, there may be a question as to whether the payments made to overseas sub-contractors / branch offices are subject to service tax under the reverse charge mechanism. The Customs Excise & Service Tax Appellate Tribunal issued a decision answering this question in favour of the service providers located in India, and thus providing clarity to the IT industry.

    Read a March 2014 report [PDF 298 KB]

  • R&D expense claim allowed even though not originally claimed on tax return, but during assessment proceedings - The Mumbai Bench of the Income-tax Appellate Tribunal allowed a taxpayer’s claim for a research and development (R&D) expenditure, even though the taxpayer made the R&D expense claim by letter during the assessment proceedings, and not on the original or amended income tax return.

    The case is: United Rubber Industries India Pvt. Ltd. Read a March 2014 report [PDF 307 KB]

  • Interest rate on Employees’ Provident Fund Scheme - Indian Government announced the rate of interest is 8.75% on deposits in Employees’ Provident Fund Scheme for the financial year 2013-14.

    Read a March 2014 report [PDF 417 KB]

  • Amended rules concerning service tax credits and input service distributors - India’s central government issued a notice amending Rule 7 of the CENVAT Credit Rules, 2004—i.e., the manner for distributing credits of service tax paid on input services by an office of the manufacturer or service provider to its factory/units (i.e., the input service distributor). These amendments are effective 1 April 2014.

    Read a February 2014 report [PDF 283 KB]

  • Salary deposited in Indian bank account of a non-resident, who is employed outside India, not taxable in India - The Agra Bench of the Income-tax Appellate Tribunal held that the salary income received by a non-resident, in his Indian bank account, for services rendered outside India is not taxable in India.

    The case is: Arvind Singh Chauhan. Read a February 2014 report [PDF 473 KB]

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