Please Help: Service tax on sharing arrangement
Posted Date : 28-Jan-2017 , 04:42:26 pm | Posted By manoj
Company “A†has awarded land for heritage purpose by the government and company has developed a heritage village on same.
Now co. has entered agreement with “B†for providing service of amusement facility and co “A†will collect and share the amount of revenue so collected in 50:50 ratio.
Fact 1: In case of first time use of amusement facility co “A†will not charge anything from customer and pay Rs. 12 per user to co “B†and co “A†claim these Rs.12 as business promotion expenses and
Fact 2: In second time use of amusement facility co “A†will charge Rs.30 and share the amount of revenue so collected in 50:50 ratio.
Issue in fact 1:
Whether co “A†will pay service tax if yes then on which amount?
Whether co “B†will pay service tax, if yes then on which amount?
Now co. has entered agreement with “B†for providing service of amusement facility and co “A†will collect and share the amount of revenue so collected in 50:50 ratio.
Fact 1: In case of first time use of amusement facility co “A†will not charge anything from customer and pay Rs. 12 per user to co “B†and co “A†claim these Rs.12 as business promotion expenses and
Fact 2: In second time use of amusement facility co “A†will charge Rs.30 and share the amount of revenue so collected in 50:50 ratio.
Issue in fact 1:
Whether co “A†will pay service tax if yes then on which amount?
Whether co “B†will pay service tax, if yes then on which amount?
Category : Service Tax | Answers : 0 | Comments : 1 | Hits : 376
Answers
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Amit Godara
31-Jan-2017 , 04:21:33 pmFor fact 1: Company A is not liable to pay service tax as it is not receiving any consideration (which is one of the primary requirement for levy of service tax) against services provided by it, on the other side company B is not liable to pay tax as it had entered with company A for revenue sharing agreement which is not covered by service tax (As per circular issued by department in February 2009).