Service tax

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Querist : Anonymous

Querist : Anonymous (Querist)

01 May 2013 Is service tax is applicable on the commission paid by Non-Resident to Resident?

CA Alexandar Gazi

CA Alexandar Gazi (Expert)
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01 May 2013 Hello,

Service tax liability on commssion paid by non-resident to resident is depending upon fulfilling following three points-

(1) Service provider is located in taxable territory (i.e. Whole of India minus Jammu and Kashmir)

(2) Service receiver is located outside India.

(3) Place of provision of service (where service is provided) is outside India.

On fulfilling above three points, there is no liability to service tax on receiving commission from non-resident. It amounts to export of service as per Rule 6A of ST Rule, 1994.

One can cite so many examples where service is provided in India for a person residing aboard and getting service charge (i.e. fees, commission, etc.)from that person (i.e. non resident). The service is liable to service tax because service provider is located in India (read taxable territory India minus J & K) and place of provision of service is in India (read taxable territory India minus J & K.)inspite of the fact that commission, etc. was received from non resident.

Note: (1) One of the conditions for being a service as export service as prescribed in Rule 6A of ST Rule, 1994 is as follows:

the payment for such service has been received by the provider of service in convertible foreign exchange.

Thanks

Alexandar Gazi