APPLICABILITY OF REVERSE CHARGE MECHANISM - EXPORTER OF SERVICE

[Lakkur SAI KRISHNA KUMAR]

Dear friends

Greetings!

May I take your help on the following:

The client is an exporter of service,  situated in India.  -  The client is a textile manufacturer . Based on the design suggested by his overseas clients, he prepares and exports the products. It is 100% export of service.

The Indian company  is a subsidiary of American Company. The American company incurs expenditure such as courier charges, photo shoot , dry cleaning charges credit card charges, Pr expenses etc  in relation to the business. While the American raises debit notes for these expenses  on actual  (without any profit margin ), it does not charge for any services.

Now the issue is whether the Indian company needs to pay ST on reverse charge basis.on the said expenses .

My view is there is no service and hence there is no consideration .  Therefore The American company cannot be called as service provider and in the same vain the Indian company cannot be called as service receiver.When Indian company is not a " service recipient " , the question Reverse charge mechanism does not arise. The status of the American company is just that of a Pure Agent.

May I request you to enhance my knowledge ? 

I await your feedback please. 

with warm regards

L SAI KRISHNA KUMAR