Payments to expats working in local arms of MNCs not liable for service tax, says AAR
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The
"There shall be no liability to pay service tax on the salary and the allowances payable by the applicant to the employee in terms of the dual employment agreement and such salary will not be eligible to levy the service tax as per the provisions of the Finance Act," the ruling states.
This followed a plea submitted by
In some recent instances, tax authorities have issued notices to MNCs where an expat employee who has received payments from the parent in his home country. They argue that salaries paid for work in India and transferred to foreign accounts by the parent company which then get reimbursed to it by the Indian subsidiary make it akin to supply of manpower and therefore should be taxable.
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Even though rulings by the AAR are specific to different cases, they would still have an effect on the tax assessment of other firms facing similar circumstances. AAR, which is a quasi-judicial body, is set up to guide companies on potential tax liabilities that they may face, and give opinions regarding these liabilities.
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