Servicetax applicablity for commission received in foriegn e

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VIJAYA (Querist)
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26 January 2013
The company 'A" pvt ltd represents its foreign principal in India . It procures orders for biotechnological equipments from

the Indian customers for its foreign principal based in Singapore.

On receipt of the order, the foreign principal ships out the equipments to the customer directly. The Indian customer make the payment directly to the foreign company.

On receipt of the payment form the Indian customer, the foreign principal release the commission to "A" pvt Ltd in foreign exchange.The foreign company does not have any office in India.

"A" pvt Ltd apart from marketing for the products, also undertakes the after sale warranty service, training of the Indian customers, sales promotional activities etc.

My Queries are :

1. Does the above transaction amount to export of service.?

2. How is the place of provision of service to be determined here?

Doesn't "A" pvt Ltd agreeing to service its foreign principal in the taxable territory subject it to service tax?.

Doesn't the activity rendering the service take place partly in India and partly outside.

Please clarify on the above urgently

CA Vipin Jain

CA Vipin Jain (Expert)
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27 January 2013 Hi Viajaya,

In new service tax provisions, export of service is governed by Place of provision rules.As per my opinion, the service A Ltd is providing is Intermediary service and in such case Place of provision is place of service provider, so in such case Place of provision is India hence taxable and fully taxable.

Actually in such case agreement/contract between service service provider and recipient plays an important role so it can be differ as per terms of contract. But as per terms you mentioned I think above is the treatment.

regards

CA Vipin Jain

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