Taxation on barter services.
This query is : Resolved
13 December 2013
Need clarification on taxation process for a barter transaction between two companies through a corporate barter exchange.
1. In what manner the amount of tax to be charged by the seller, as he is not suppose to get the money but will get other goods & services in exchange.
2. How buyer should deduct the TDS?
3. How a corporate barter exchange through which this transaction has been processed, will charge for his service and applicable rate of service tax for the same.
1. In what manner the amount of tax to be charged by the seller, as he is not suppose to get the money but will get other goods & services in exchange.
2. How buyer should deduct the TDS?
3. How a corporate barter exchange through which this transaction has been processed, will charge for his service and applicable rate of service tax for the same.
13 December 2013
in case of barter exchange no tds is applicable.
13 December 2013
Tushar any reason for the same?
TDS will apply on both the sides of the transaction as far the transaction involves activities covered under TDS provisions.
TDS will apply on both the sides of the transaction as far the transaction involves activities covered under TDS provisions.
13 December 2013
sale of goods will be covered with VAT/CST etc. services would attract service tax.
13 December 2013
sale of goods will be covered with VAT/CST etc. services would attract service tax.
13 December 2013
sale of goods will be covered with VAT/CST etc. services would attract service tax.
13 December 2013
Thanks Mr. Tushar & Mr. Nikhil for your prompt reply. However I would request a more detailed answer as per three specif points which I had highlighted.
It had come to my notice that companies generally don't raise invoices or raise it for zero value, as per them once they deliver the goods but never received money against it, create problem in closing that entry.
Please confirm the best process to do so.
When a barter transaction is routed through Corporate Barter Exchange transactions happens in points, where one point is equal to one rupee. In a case where the corporate barter exchange had received his service fee in points, how the tax part needs to be cover in it.
Please go through the complete question & kindly share a more detailed reply, clarifying the complete process.
It had come to my notice that companies generally don't raise invoices or raise it for zero value, as per them once they deliver the goods but never received money against it, create problem in closing that entry.
Please confirm the best process to do so.
When a barter transaction is routed through Corporate Barter Exchange transactions happens in points, where one point is equal to one rupee. In a case where the corporate barter exchange had received his service fee in points, how the tax part needs to be cover in it.
Please go through the complete question & kindly share a more detailed reply, clarifying the complete process.
13 December 2013
Dear Piyush,
if the company is not raising invoices, that is improper accounting.
Remember settling one transaction another is a payment issue. TDS becomes applicable on accrual.
You need to raise proper invoices and settle them against the counter invoices. TDS shall be applicable wherever transactions are covered under TDS provisions.
Even where settlements are in point system, TDS should be deductible on the point value.
Please note again, barter is a settlement system, There is no requirement of transactions to be settled in cash for TDS to apply.
if the company is not raising invoices, that is improper accounting.
Remember settling one transaction another is a payment issue. TDS becomes applicable on accrual.
You need to raise proper invoices and settle them against the counter invoices. TDS shall be applicable wherever transactions are covered under TDS provisions.
Even where settlements are in point system, TDS should be deductible on the point value.
Please note again, barter is a settlement system, There is no requirement of transactions to be settled in cash for TDS to apply.
13 December 2013
Mr nikhil can u provide any section or case law refrence in this regard?
13 December 2013
Tushar,
Bhai, read any taxing provision? where does it say that you need to pay for tax to arise? Barter is just a settlement system. If barter had not attracted TDS, everyone would have settled all the transactions in barter.
Lets read 194C:
"Any person responsible for paying any sum to any resident (hereafter in this section referred to as the contractor51) for carrying out any work51 (including supply of labour for carrying out any work) in pursuance of a contract between the contractor and a specified person shall, at the time of credit of such sum to the account of the contractor or at the time of payment thereof in cash or by issue of a cheque or draft or by any other mode, whichever is earlier, deduct an amount equal to"
Read the last line, "by any other mode"
Bhai, read any taxing provision? where does it say that you need to pay for tax to arise? Barter is just a settlement system. If barter had not attracted TDS, everyone would have settled all the transactions in barter.
Lets read 194C:
"Any person responsible for paying any sum to any resident (hereafter in this section referred to as the contractor51) for carrying out any work51 (including supply of labour for carrying out any work) in pursuance of a contract between the contractor and a specified person shall, at the time of credit of such sum to the account of the contractor or at the time of payment thereof in cash or by issue of a cheque or draft or by any other mode, whichever is earlier, deduct an amount equal to"
Read the last line, "by any other mode"
13 December 2013
so what is your view when there is only service provided and in return nothing is given?
13 December 2013
that is not barter. that is free service. even service tax won't apply there.
13 December 2013
so in case if there is barter exchange actually speaking but it is shown that there is only 1 way transaction and there is no return then how tds will apply????? right
13 December 2013
well then the other party will also do the same...right??? one day TDS officers will come for a survey and apply substance over form...
I don't understand the need for doing all this for evading taxes. By showing zero values, you will have to reduce your turnovers. How does this help?? will screw up your ratios, reduce your leverage possibilities!!
I don't understand the need for doing all this for evading taxes. By showing zero values, you will have to reduce your turnovers. How does this help?? will screw up your ratios, reduce your leverage possibilities!!
13 December 2013
well i have come across such situation 2 times that is whiy had asked u.
13 December 2013
tushar bhai,
log bahut kuch karte hain..
my advice is simple to all my clients..dont play around law too much..
log bahut kuch karte hain..
my advice is simple to all my clients..dont play around law too much..
Message likes :
1 times
13 December 2013
Enlightened bros!!! Thx.. :)..
14 December 2013
you are welcome Yogesh ji.
16 December 2013
Furthermore to my query, can you please elaborate the taxation process with exact tax amount as per below example –
A – Seller (Media Company)Service
B – Buyer(Furniture company)- product
X – Corporate Barter exchange
B buys Rs. 1lac worth Media package from A through X. For concluding this transaction X had earned commission of 7% in CASH from B and 5% in Barter Points from A.
Now as per your last reply, you mentioned to settle the Invoice with counter invoices. In most of the cases B will not be selling back to A. With now 1lac worth of barter points in his credit, he will buy from any other member of X for a part, full or higher value.
Please confirm the actual amount of tax to be charged, TDS deduction between members and service tax charged on transaction fee earned by X and there settlements (inc. TDS applicable for X)
Pardon my imprudent follow-up, as from
non-commerce background, I need a bit more clarity on it.
Thanking you for all of your support
A – Seller (Media Company)Service
B – Buyer(Furniture company)- product
X – Corporate Barter exchange
B buys Rs. 1lac worth Media package from A through X. For concluding this transaction X had earned commission of 7% in CASH from B and 5% in Barter Points from A.
Now as per your last reply, you mentioned to settle the Invoice with counter invoices. In most of the cases B will not be selling back to A. With now 1lac worth of barter points in his credit, he will buy from any other member of X for a part, full or higher value.
Please confirm the actual amount of tax to be charged, TDS deduction between members and service tax charged on transaction fee earned by X and there settlements (inc. TDS applicable for X)
Pardon my imprudent follow-up, as from
non-commerce background, I need a bit more clarity on it.
Thanking you for all of your support
16 December 2013
prima facie: you need to deduct TDS on commission income. With regards to points, I believe that should be considered as the consideration received for the goods supplied.
With regards to Points. Who got the points A or B. What did the B got?
With regards to Points. Who got the points A or B. What did the B got?
16 December 2013
with regards to service tax, If X charges you service tax, you need to pay it. You can claim input credit against the same subject to CENVAT rules.
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