I am into Advertising & Marketing and taken service tax number from Delhi, and some of my clients have asked me for some merchandise/product which i have outsourced and delivered. Now this deal is a sale and not a service and i have paid VAT to the seller and now i am confused that how to bill the client, i cant ask for service tax because its a sale and not a service. Kindly suggest a way out.
22 June 2011
Under service tax, a service provider can act as 'pure agent' of his customer provided following conditions are satisfied:
(i) the service provider acts as a pure agent of the recipient of service when he makes payment to third party for the goods or services procured; (ii) the recipient of service receives and uses the goods or services so procured by the service provider in his capacity as pure agent of the recipient of service; (iii) the recipient of service is liable to make payment to the third party; (iv) the recipient of service authorises the service provider to make payment on his behalf; (v) the recipient of service knows that the goods and services for which payment has been made by the service provider shall be provided by the third party; (vi) the payment made by the service provider on behalf of the recipient of service has been separately indicated in the invoice issued by the service provider to the recipient of service; (vii) the service provider recovers from the recipient of service only such amount as has been paid by him to the third party; and (viii) the goods or services procured by the service provider from the third party as a pure agent of the recipient of service are in addition to the services he provides on his own account.
If the above conditions are satisfied, then service tax is not required to be charged on the value of product which has been delivered by you along with the services.
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