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SERVICE TAX ON COMMISSION AGENT

Today we are discussing on Service tax on commission agent after the amendment made in place of provision of service.Government of India has amended the definition of intermediary in Rule 2(f) with rule 9 of Place of provision of service tax rules Via Notification No 14/2014 ST dated 11th July 2014.

Definition of intermediary Upto 30/09/2014

“intermediary” means a broker, an agent  or any other person, by whatever name called, who arranges or facilitates a provision of a service (hereinafter called the ‘main’ service) between two or more persons, but does not include a person who provides the main service on his account.

Definition of intermediary WEF 01/10/2014

“Intermediary”‖ means a broker, an agent or any other person, by whatever name called, who arranges or facilitates a provision of a service (hereinafter called the ‘main‘ service) or A SUPPLY OF GOODS, between two or more persons, but does not include a person who provides the main service or supplies the goods.

(II) Effect of Amendments –

Change in the definition of Intermediary will affect the Commission income of importers agent and commission income of exporter’s agent.

Upto 30/09/2014 service tax on commission agent is covered under Rule 3 of Place of provision of service after amendment in the definition of intermediary service tax on commission agent is covered under Rule 9 of Place of provision of service.

As per Rule 3 of Place of provision of service (POP) Rules 2012, Place of provision is location of service receiver.

As per Rule 9 of Place of provision of service of (POP) Rules 2012, Place of provision is location of service provider

(III) Service tax on Commission Agent in case of Exports of Goods

Commission paid to the agent outside India for facilitating exports is covered under Rule 3 of place of provision of service, after 01st October 2014 it is covered under Rule 9 of place of provision of service.

Upto 30/09/2014 – Commission paid to agent outside India for helping exports of Goods is covered under Rule 3 of POP. As per Rule taxability will depends on location of service receiver.

In that case service provider (commission agent) is located outside India and Service receiver (dealer whose goods are exported) is in India. As service receiver is in India commission paid for exports of goods is taxable. However partial exemption was provided by Notification No 42/2012 ST dt 29th July 2012

After Amendment WEF 01/10/2014 – Commission paid to agent outside India for helping exports of Goods is covered under Rule 9 of Place of provision of service (POP). As per Rule taxability will depends on location of service Provider.

In that case service provider (commission agent) is located outside India and Service receiver (dealer whose goods are exported) is in India. As service Provider is located outside India commission paid for exports of goods is not taxable.

(IV) Service tax on Commission Agent in case of Import of Goods 

Commission paid to the agent in India for facilitating Imports is covered under Rule 3 of place of provision of service, after 01st October 2014 it is covered under Rule 9 of place of provision of service.

Upto 30/09/2014 – Commission paid to agent in India for helping Imports of Goods in India is covered under Rule 3 of Place of provision of service (POP). As per Rule taxability will depends on location of service receiver.

In that case service provider (commission agent) is located in India and Service receiver (dealer whose goods are exported) is located outside India. As service receiver is outside India commission paid for imports of goods is not taxable.

After Amendment WEF 01/10/2014 –

Commission paid to agent in India for helping Imports of Goods in India is covered under Rule 9 of Place of provision of service (POP). As per Rule taxability will depends on location of Service Provider.

In that case service provider (commission agent) is located in India and Service receiver (dealer whose goods are exported) is located outside India. As service Provider is in India commission paid for imports of goods is taxable.

Is Reverse charge applicable on Import Commission Income

No, Reverse charge is not applicable on import commission income , as it is an direct income. Reverse charge will be applicable if person has done some expenses and on that expense he has pay the service tax.

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7 comments

  1. HELLO ALL,

    I AM A CONSIGNEE AGENT . MY SUPPLIER SEND ME GOODS FROM MUMBAI I SELL IT IN THE PURCHASE RATE HE GIVES ME MY COMMISSION SEPARATELY . I HAVE TO BORNE AND PAY SERVICE TAX ACCORDING TO OUR CONTRACT BUT MY FINANCIAL ADVISER SAYS ONLY TO PAY SERVICE TAX IF COMMISSION EXCEEDS 10 LAKHS FOR THAT YEAR.

    WHAT SHOULD I DO SHALL I PAY SERVICE TAX OR SHOULD I PAY IT AFTER MY COMMISSION EXCEEDS 10 LAKHS

  2. HELLO ALL

    I AM RETAILTRANSPORT OPERATOR. BOOK GR LESS THAN 750/- RS BUT SOME FRIGHT ARE MORE THAN 750/- RS FOR ALL THE GR ABOVE 750 RS I HAVE RECEIVED SERVICE TAX AND PAID SO TO THE SERVICE TAX DEPARTMENT. AFTER THAT I CONSOLIDATE THESE GR AND ENTER THEM IN ONE CHALLAN . THE TOTAL FREIGHT RECEIVED (INCLUDING SERVICE TAX) ARE MENTIONED IN THAT CHALLAN. THEN I PAY TRUCK FREIGHT AND WHAT SO EVER AMOUNT LEFT BEHIND AFTER PAYING SERVICE TAX IS BOOKED AS COMMISSION IN BOOKS.
    SO QUESTION IS, I HAVE TO SERVICE TAX PAY SERVICE TAX ON AMOUNT LEFT WHICH BOOKED AS COMMISSION IN MY BOOKS.

  3. DEV KUMAR MUNDRA

    if i earn LIC commission rs. 12 lac or more than service tax applicable on it or not.

  4. Dear Sir,

    We are distributors for over seas manufacturers. Some time we buy and sell and some times manufacture (out side India) supply to Indian customers directly and give us commission. As per new amendments, we started paying 12.35% Tax from 1st oct 2014 and now 14.5 %. Our principals are not ready to pay ST and told that we have to pay it from our commission. That means we are paying 14.5% ST from our pocket almost like turnover tax. No business will have very huge margins and it is becoming unviable. Please advice.

  5. Dear Sir,

    we are commission agent of foreign company, We are support to foreign company to get order in india and we are getting commission from foreign company. We are liable to pay service Tax.

    Pls. let us know in which situation reverse charge will be applicable as per your last paragraph in above articles.

  6. Dear sir,
    my commision income of goods transport agency of pvt. ltd. company is 5 lacs for fy 2015-16 and the books receipts is 2 crore .then i want to ask that is service tax will have to pay as per current rate or we can take and redumption.
    please reply me early.
    sandeep sharma

  7. Sanjay Vijayvargiya

    SIR I WANT TO KNOW THAT WHETHER SUB BROKERS ARE REQUIRED TO OBTAIN GST REGISTRATION AND WHETHER ANY EXEMPTION IS AVAILABLE TO THEM AS UNDER SERVICE TAX.

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