Cenvat credit of service tax

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durgaprasad

accounts executive

225 Points Joined June 2015

We are recently started a budgeted hotel industry and we got a online portal bookings for room reservation. Online portal companies are collected amount from guests, But online portal companies are deposited the amount to our bank what we committed with them. For example our rack rate is 2050/- inclusive of all taxes, they deposited 1650/- inclusive of all taxes. We raise the invoice on the amount of Rs.1650/- on the portal company and the rest of balance amount we can show a discount. We cannot deduct any TDS , because online company has deposited the amount of Rs.1650/-. The online company has showed the balance amount as commission and they sent commission invoice , inthat they mentioned service tax details. Can we avail the service input....... and one more is we cannot book the commission. How can we avail the service input. I want to know the clarification on my Query ? 1. If TDS applicable.... How can we deduct the TDS( we are not repay the any amount to them) 2. If service input can be avail....... How can we avail (we are not mentioned as commission in our books/ invoice)

Replies (4)

CA Goutam Sharma

Chartered Accountant in Practice

468 Points Joined June 2011

Ist of all.. the accounting is incorrect. you have to account for the gross room charges. netting is not permisiible under accounting standards.

2) once you show the gross income of 2050/ as rent , you will also be eligible to account commission expense. ultimately no impact on Income tax

3) as far as service tax is concerend.. you can avail cenvat credit of service tax charged in the bill of online portal companies provided you account for gross income and commission expenses separately..

for eg

you will issue invoice on 1600+ 15%
you will get credit of STax paid on (2050-1600) =450
450 x 15%

4) As far as Tds on commission is concerned, first make sure that the online portal entity is resident in india or not.
if it is resident, then you have two options
a) make contract in such a way that you will be able to depost tds from the amount received by the portal. it is quite difficult to enter into a contract as such. however you may try.
b) second option is far more practical..In case the portal entity is resident and issue a certificate that the commission charged to you has been considered in the total income of portal.. then you need not deduct tds from the commission.

If the portal is non resident.. then you have to deduct tds..otherwise commission will be disallowed..and you will have to bear the burden of income tax.. however ..you can take cenvat even in that case also.

for further explanation you may mail gs.genus @ gmail.com

9007932407

durgaprasad

accounts executive

225 Points Joined June 2015

Thank you for your nice clarification, in that case the portal company is resident of india.

TDS is applicable or not for resident of india portal companies

CA Goutam Sharma

Chartered Accountant in Practice

468 Points Joined June 2011

Payment in terms of commission to resident assessee is covered under TDS provisions and Tds is applicable over it. The only difference you have in Resident and Non Resident on the grounds of TDS is that in case of resident, you have options to comply, whereas for non resident, you are duty bound to TDS anyhow..

Now come to the options you have:
a) Make the portal agree for tax deduction anyhow.

b) Do not deduct TDS and keep going as usual.
It will amount to disallowance of 30% of commission expenditure

c) Make them agree to provide a Certificate in effect to certify that they have included commission received form you in their total income at the end of the year. If they agree, then no need to deduct TDS