13 October 2009
my company is a DCA cum CSA haldia petrochemicals ltd.it receives commssion on sale of goods @ specified rate and paying service tax on commission.
the company is receiving interest from its customers on delay payment and also receiving early payment incentive from Consignor i.e. Haldia petrochemicals Ltd.this EPI is based on how early payment was made. for eg.if supplier gives 14 days credit and we make payment in 14 days than no early paymnet incentive to be received. but if we make payment in 10 days it mean we paid 4 days earlier than we are getting EPI=4 Days*incentive per day.
few days earlier some people came from service tax department for service tax audit.they were telling that interest received from cutomers and EPI received from supplier are taxable service and service tax to be payable on that and they have raised demand for the same.
is the demand raised by them as per law.? will the interest recd from customer and EPI from supplier is taxable.
13 October 2009
The incentive is in relation to rendering of service as a CSA therefore will form a part of taxable income. As this is associated with the arrangement of you being a service provider.
Interest is not subject to Service tax since it is in relation to sale of goods and not rendering of any service to your customer. There are ample case laws to support this statement
14 October 2009
Mr.Dayal thanks for reply but still i m not satisfied. incentive is not providing taxable service,it is for making early payment,in other words it is like cash discount. pls go through the following eg. suppose cash price: rs 100000/- 14 days credit price: 100690/-.the difference between cash price and credit price is rd 690. this 14 days credit price arrived by adding 14 days interest @ 18% in cash price.so per day price difference is rs 690/14=49.28/-
if i purchased material on cash term i have to pay rs.100000/- if i purchased material on credit term the invoice value will be 100690/- and same amount i have to pay on 14th days.
but if i purchased on 14 days credit but i made payment on 10th day it means i paid 4 day earlier therfore i m entitled to Rs.197.14 (49.28*4) as early payment incentive.according to me making payment before due date is not amounting to any taxable service.
15 October 2009
In that case you may rely on the following judgement
The appellant in this case an advertising agency received incentives from Media. The department considered these receipts as extra commission and proceeded to levy service tax under Advertising Agents service by invoking extended period of limitation. The Tribunal held that incentives in the form of discounts are not liable to service tax and only charges received towards advertising services are liable. Since amounts in dispute are not received by appellant in relation to service provided to their clients, demand and penalty was not sustainable.
Kerala Publicity Bureau vs. CCE 2008(9) STR 101 (Tri-Bang.)
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