Purchase or commission

This query is : Resolved

Querist : Anonymous

Querist : Anonymous (Querist)

24 October 2011 I have Vodafone distributorship, company is giving us Recharge coupon including service tax i.e company is giving Rs. 5000 coupan @ 100 in Rs.48150/- means Purchase 48150/- & sales 50000/- or take as commisssion Rs. 1850/- ????

I also give 50% or more to local retailers of my area in commission or 1 to 1.25% ?

what kind of treatment I need to do ?

Do I consider as purchase/sales and take that amount in VAT return ? or treat as commission and file st return only ??

Ravikant

Ravikant (Expert)
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27 October 2011 it can be considered as incidental commission for distribution : file ST return

Querist : Anonymous

Querist : Anonymous (Querist)

28 October 2011 Thanks Ravikant sir,

I would like to ask 3 things more....pls

1). in which category I have to file ST return ?
2). file with net commission or gross ?
3). How to calculate ne commission income(1850-1250 retailer)=600 ??

any other things you would like share it Pls guide me

thanks again.

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Asha Kanta Sharma

Asha Kanta Sharma

(Expert)
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10 August 2024 When dealing with Vodafone distributorship and handling recharge coupons and commissions, it is important to properly classify and report transactions for both VAT and Service Tax purposes. Here’s a detailed approach to addressing your queries:

### **Classification of Transactions**

#### **1. Treatment of Recharge Coupons**

**Purchase and Sale:**

- **Recharge Coupons:** If you purchase recharge coupons from Vodafone for Rs. 48,150 and sell them for Rs. 50,000, the transaction involves both a purchase and sale.

**Commission:**

- **Commission Calculation:** The difference between the sale price and the purchase price of the recharge coupons (Rs. 50,000 - Rs. 48,150) represents your commission, which is Rs. 1,850.

**Local Retailers:**

- **Retailer Commission:** If you pay a commission to local retailers, you should account for this in your financial records as an expense. This commission is a cost of doing business and reduces your net commission income.

### **VAT and Service Tax Treatment**

**VAT (Value Added Tax):**

- **VAT on Coupons:** Since recharge coupons are typically not subject to VAT, you do not need to report them in your VAT return. However, if you are engaged in retail sales or other taxable activities, you need to ensure that you’re compliant with VAT requirements for other aspects of your business.

**Service Tax:**

- **Service Tax on Commission:** If your distributorship is considered a service provider, the commission income might be subject to Service Tax.

### **Reporting and Filing**

#### **1. Filing Service Tax Return**

**Category for ST Return:**

- **Service Tax Category:** You should file the Service Tax Return under the category of “Business Auxiliary Service” if your activity of distributing recharge coupons falls under this category.

**Gross or Net Commission:**

- **Gross Income:** Service Tax should be filed on the gross commission amount. The gross commission is the total commission earned before deducting any payments to retailers.

**Calculating Net Commission:**

- **Net Commission:** Your net commission is calculated after subtracting the commission paid to local retailers. For example, if you earn a commission of Rs. 1,850 and pay Rs. 1,250 to retailers, your net commission is Rs. 600.

### **Steps to Follow**

1. **Record Transactions:**
- Record the purchase of recharge coupons as an expense or asset (depending on your accounting practices).
- Record the sale of recharge coupons as income.
- Calculate and record the commission income (Rs. 1,850) and the payment made to local retailers (Rs. 1,250).

2. **Service Tax Return Filing:**
- **File ST Return:** File your Service Tax return with the gross commission amount.
- **Calculate ST:** Calculate the Service Tax on the gross commission income. Ensure you apply the correct Service Tax rate.

3. **Maintain Documentation:**
- Keep all invoices, receipts, and commission records for verification and compliance purposes.

### **Summary**

- **Recharge Coupons:** Purchase and sale of coupons should be recorded accordingly. The difference between the sale and purchase price is treated as commission.
- **Commission:** The commission earned (Rs. 1,850) is your income. The payment to retailers (Rs. 1,250) is an expense.
- **VAT Treatment:** Recharge coupons typically don’t involve VAT.
- **Service Tax Filing:** File your Service Tax return under the relevant category and on the gross commission income.

If there are any complex transactions or specific issues, consulting a tax professional or accountant may provide tailored advice and ensure compliance with all regulatory requirements.