Service tax on commission
This query is : Resolved
04 March 2016
We are liable to pay service tax on commission received against consignment sales. Till last financial year the commission received was less than 10 lakh and were availing the exemption against notification 33/2012. This year we expect the commission to exceed Rs.10 lakhs. I have the following queries:
1. Is it mandatory to consider the 10 lakh exemption and charge the service tax only for the balance commission? Or can we charge the service tax on whole amount?
2. If we avail the exemption of 10 lakhs then do we have to mention anything on our Invoice regarding the same?
3. How will we declare the exemption availed in the return ST3?
We have availed the exemption in the return for the period Apr-Sep 2015 also. There was no commission received during this period.
1. Is it mandatory to consider the 10 lakh exemption and charge the service tax only for the balance commission? Or can we charge the service tax on whole amount?
2. If we avail the exemption of 10 lakhs then do we have to mention anything on our Invoice regarding the same?
3. How will we declare the exemption availed in the return ST3?
We have availed the exemption in the return for the period Apr-Sep 2015 also. There was no commission received during this period.
04 March 2016
From your query, it appears that you are already registered to service tax and are filing ST - 3 regularly. You are also availing of the exemption for SSEs as per Notification No:33/2012.
When an assessee avails of the the threshold exemption, he has to collect Service Tax on the excess over Rs. 10 lakhs only. In any single financial year, if the assessee has availed of teh exemption, he has to collect the Service Tax only after crossing the threshold limit of Rs.10 lakh. He cannot avail of the exemption for say Rs.6 lakhs in the first half and then start collecting Service Tax on all invoices issued from 1st October. He necessarily has to refrain from collecting service tax till he reaches Rs.10 lakhs. In case he collects service tax on the whole of the commission, then his return for April to September 2015 is false, and he opens himself to charges of supression of fcts with teh intent to evade payment of service subject, subjecting to 100% penalty on the amount sought to be evaded. Not only that the period of imitation which is 18 months now (proposed to be raised to 30 months in Finance bill 2016) will automatically attract the provisio and the Department can come after the assessee for the next 5 years.
When an assessee avails of the the threshold exemption, he has to collect Service Tax on the excess over Rs. 10 lakhs only. In any single financial year, if the assessee has availed of teh exemption, he has to collect the Service Tax only after crossing the threshold limit of Rs.10 lakh. He cannot avail of the exemption for say Rs.6 lakhs in the first half and then start collecting Service Tax on all invoices issued from 1st October. He necessarily has to refrain from collecting service tax till he reaches Rs.10 lakhs. In case he collects service tax on the whole of the commission, then his return for April to September 2015 is false, and he opens himself to charges of supression of fcts with teh intent to evade payment of service subject, subjecting to 100% penalty on the amount sought to be evaded. Not only that the period of imitation which is 18 months now (proposed to be raised to 30 months in Finance bill 2016) will automatically attract the provisio and the Department can come after the assessee for the next 5 years.
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04 March 2016
Is any declaration to this effect (disclosing the exemption availed) required in the Bills of commission raised?
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04 March 2016
No. It is not necessary to make any such disclosure to your clients, however, how you would raise the invoice is important. You will have to issue one or more invoices not collecting service tax till the turnover of Rs, 10 lakhs is reached, and a separate invoice for the balance in excess of Rs. 10 lakhs.
In case your contract stipulates that only a single invoice for the whole year, then it would become essential that your invoice show the tax free service -
Commission Receivable 5% of T.O Rs.500,00,000 = Rs.25,00,000
------------------------
Taxable Service = Rs.15,00,000
Tax free Service = Rs.10,00,000
Add : Service Tax @ 14% = Rs. 2,10,000
Add: Swatch Bharat Cess @ 0.5% = Rs. 7,500
-----------------------
Total Rs.27,17,500
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I hope this clarifies you doubt.
In case your contract stipulates that only a single invoice for the whole year, then it would become essential that your invoice show the tax free service -
Commission Receivable 5% of T.O Rs.500,00,000 = Rs.25,00,000
------------------------
Taxable Service = Rs.15,00,000
Tax free Service = Rs.10,00,000
Add : Service Tax @ 14% = Rs. 2,10,000
Add: Swatch Bharat Cess @ 0.5% = Rs. 7,500
-----------------------
Total Rs.27,17,500
----------------------
I hope this clarifies you doubt.
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05 March 2016
How should we file the ST3 for this period which reflects the 10 lakh exemption that we have availed.
05 March 2016
In ST - 3 Return, the page after 'General Information' appears as Taxable Service (1), Taxable Service (2) and so on, depending on the number of services. Since the exemption under Notification No: 33/2012 is applicable to all services, the procedure recommended should be followed for all services, but the total exemption claimed cannot exceed Rs.10 Lakhs.
The page 'Taxable Service' will state 'A 9: Taxable Service(s) for which Tax is being paid'.
Item 'A 11' pertains to Exemptions. Fill up Item 'A.11.1; Has the assessee availed of any exemption' - reply 'Yes'.
Item 'A.11.2' dialouge box will open - fill up the Notification No and clause.
Part B of ST - 3 pertains to 'Value of Taxable Service and Service Tax Payable'. On filling up item 'A.11.1' in positive - item 'B 1.9: Amount charged for exempted service provided or to be provided
(other than export of service given at B1.8 above)' is now open and you can place the value of exemption claimed.
Automatically Item 'B 1.14: NET TAXABLE VALUE' would be the Taxable Value after Exemption.
The page 'Taxable Service' will state 'A 9: Taxable Service(s) for which Tax is being paid'.
Item 'A 11' pertains to Exemptions. Fill up Item 'A.11.1; Has the assessee availed of any exemption' - reply 'Yes'.
Item 'A.11.2' dialouge box will open - fill up the Notification No and clause.
Part B of ST - 3 pertains to 'Value of Taxable Service and Service Tax Payable'. On filling up item 'A.11.1' in positive - item 'B 1.9: Amount charged for exempted service provided or to be provided
(other than export of service given at B1.8 above)' is now open and you can place the value of exemption claimed.
Automatically Item 'B 1.14: NET TAXABLE VALUE' would be the Taxable Value after Exemption.
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