Commission paid to foreign agents by exporters

Dear Gopal,

Please find answers to your queries in red below:

 1.    Is service tax payable on commission paid to foreign agents by the exporters?

Service tax is exempt of export of services. Therefore, any commission paid by Exporter to an agent located abroad is not liable to tax.

However, please note that the comments are primarily based on the assumption that the Foreign Service provider is a commission agent falling under taxable service category Business Auxiliary services (‘BAS’) which is taxable on basis of location of service recipient.

Please note that for all export transactions service contract is a primary document that needs to be properly reviewed therefore before taking export stand please get the contract reviewed from a service tax consultant.    

2.    Is there any limit on commission payable by the exporter?

There is no such limit under service tax law

3.    Is there any exemption from service tax on commission payable by the exporter to the foreign agents?

Same as Answer provided under 1 above

4.    Any notifications and case laws on the above issues.

Please refer to the service tax export rules notified under notification no 9/2005 dated 3-3-2005

In case you require service tax review, advisory and compliance assistance then please contact

Thanks and regards

Hardeep Singh Lamba

Service tax consultant

Chartered Accountant

+91-9891535339

I have an entirely different view.

The services of non resident are liable under Sec66A under reverse charge mechanism. The service provided by the agent for exporters is under BAS and since the recepient [ export] is in India and uses the information/ leads provided by the agent, there is a liability under ST.

Under notification 18/19 of 2009 as amended, there is an exemption amounitng to 10% of the value. Beyond that the exporter may have to pay and go for a refund.  

The Indian cpmmission agent who books orders for exporters outside India is eligible for exclusion as export of services since his services are received outside India.

Hello, 

What is the position of this thread with respect to the new Notification. No. 42/2012. 
 

Services Received.

Service provided by a commission agent located outside India and engaged under a contract or agreement or any other document by the exporter in India, to act on behalf of the exporter, to cause sale of goods exported by him.

Condition for Exemption.

(1) The exporter shall declare the amount of commission paid or payable to the commission agent in the shipping bill or bill of export, as the case may be.

(2) The exemption shall be limited to the service tax calculated on a value of ten per cent of the free on board value of export goods for which the said service has been used.

(3) The exemption shall not be available on the export of canalised item, project export, or export financed under lines of credit extended by the Government of India or EXIM Bank, or export made by Indian partner in a company with equity participation in an overseas joint venture or wholly owned subsidiary.

(4) The exporter shall submit with the half-yearly return after certification of the same as specified in clause (g) of the proviso—

(i) the original documents showing actual payment of commission to the commission agent; and

(ii) a copy of the agreement or contract entered into between the commission agent located outside India and the exporter in relation to sale of export goods outside India:

Question:-

Is the exemption upto 10% of FOB value? or 1.236% of FOB value ie 12.36% of 10% of FOB value?