Can a resident who receives commission from a non-resident (export of service )for Sale of foreign made machinery on his behalf, claim refund of Service tax paid for commission paid to a resident in relation to sale of such machinery in India?
Assessee received commission from a Foreigner for the Sale of Foreign machinery here (export of services), And also he has paid Service tax to another local commission agent for the sale of same asset (input). What I want to know is whether he is eligible to claim refund of Service tax paid to local agent. If so is there any time limit for claiming such refund. Thanks once again for your reply.
24 July 2024
In the scenario you've described, where a resident in India receives commission from a non-resident for facilitating the sale of foreign machinery in India (which qualifies as an export of service), and also pays service tax to another local commission agent, here are the considerations for claiming input tax credit (ITC) and refunds under GST:
### 1. Eligibility for Input Tax Credit (ITC)
Under GST, input tax credit can generally be claimed on taxes paid on inputs used for making outward supplies (including exports of services). However, specific conditions must be met:
- **Goods and Services**: Input tax credit is available for goods or services used or intended to be used in the course or furtherance of business.
- **Documentation**: Proper tax invoices and other prescribed documents are required to claim ITC.
- **Reverse Charge Mechanism**: If the commission received from the non-resident is under reverse charge (i.e., the recipient of service is liable to pay tax instead of the supplier), the recipient can claim credit for the tax paid under reverse charge mechanism, subject to conditions.
### 2. Claiming Refund of Service Tax Paid to Local Agent
If the resident has paid service tax to another local commission agent for services received in relation to the sale of the same asset, whether a refund is applicable depends on several factors:
- **Nature of Service**: The services provided by the local commission agent should be in relation to the export of service (sale of foreign machinery on behalf of the non-resident).
- **Export of Service**: The sale of foreign machinery should qualify as an export of service under GST provisions.
- **Refund Process**: Refunds under GST can be claimed for taxes paid on inputs or input services used for making exports or zero-rated supplies. The application for refund needs to be filed within the prescribed time limit and with necessary supporting documents.
### Time Limit for Claiming Refund
- The GST law provides a time limit for claiming refunds. Generally, the application for refund needs to be filed within two years from the relevant date.
- Ensure all documentary requirements are fulfilled as per GST rules to avoid delays or rejection of refund claims.
### Conclusion
To summarize, if the resident in India is involved in facilitating the export of foreign machinery on behalf of a non-resident and has paid service tax to a local commission agent, they may be eligible to claim input tax credit on the taxes paid under GST, provided all conditions are met. The eligibility for refund depends on the nature of services provided by the local agent and compliance with GST refund procedures. It's advisable to consult with a GST expert or tax advisor to assess specific details and ensure correct compliance with GST regulations.
CAclubindia
