14 June 2016
We are marketing company .. We do marketing of plots in developed layouts .. Developers give plots to us @ 500 per square feet to us and we can sell those to customer at any price more than 500 i .e 600 or 700 per square feet .. Or more . The diff of Rs 100 or 200 ( 600-500)(700-500) is my commission . Sale price is not fixed ,it depends on customer . In this situation service tax is applicable or not . If not how we can show this in books .. Please guide me
14 July 2024
In your scenario where you are acting as a marketing company for plots in developed layouts, and you receive a commission from developers based on the difference between the price at which you sell the plots to customers and the price at which developers provide them to you, the tax implications are as follows:
1. **Service Tax (or GST) Applicability**: Service tax (or GST, depending on your jurisdiction and the prevailing tax regime) would typically be applicable on the commission you earn. Since you are providing a service (marketing and facilitating the sale of plots), and you receive a consideration for this service (commission), it falls under the purview of service tax/GST.
2. **Calculation of Tax Liability**: The tax would be applicable on the commission amount you receive from the developers. In your case, if you receive a commission of Rs 100 or Rs 200 per square foot (depending on the selling price to the customer), the service tax/GST would be calculated on this commission amount.
3. **Exemptions or Abatements**: In some tax regimes, there might be exemptions or abatements available for certain types of services or small-scale service providers. These exemptions or abatements vary by jurisdiction and are subject to specific conditions. It's advisable to consult with a tax advisor or accountant who is familiar with the tax laws applicable to your business to determine if any exemptions or abatements apply to your situation.
4. **Accounting Treatment**: To show this in your books: - Record the commission earned as income in your books of accounts. - Maintain proper documentation of the agreements with developers and records of commission received. - Segregate the commission income from other sources of income if applicable.
5. **GST Compliance**: If GST is applicable, ensure you comply with GST registration requirements, filing of GST returns, and payment of GST on time to avoid penalties.
To summarize, service tax or GST is likely applicable on the commission income you earn from marketing plots. Check for any exemptions or abatements applicable in your jurisdiction and maintain proper records and compliance with tax laws to ensure smooth operations of your marketing business.
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