Service Tax on Recharge Coupon Distributors

CA Unnikrishnan Nair N (Chartered Accountant) (2083 Points)
Replied 04 May 2011

If the mobile operator sells the recharge coupons to the distributor, it is trading in the hands of the distributor and he has no service tax liability. Rs. 5 is trading profit . However, if mobile operator entrusts the distributor to sell the coupons on their behalf for Rs. 5 is the commission, same is liable to service tax under BAS.

3 Like

CA Ruchir Jayantbhai Desai (Chartered Accountants) (53 Points)
Replied 04 May 2011

But, Sale of Coupon is taxable event under the head of Telecommunication Services. In that the case, the S tax on Rs. 100/- is paid. Still the distributor has to pay tax on his profit? his profit is included in Rs, 100/-.

CA Unnikrishnan Nair N (Chartered Accountant) (2083 Points)
Replied 04 May 2011

Distribtor has liability only when the same is on commission basis. Mobile operator is liable to tax on Rs.100 under telecom service while distributor pays tax under BAS. For trading profit no service tax.

U S Sharma (glidor@gmail.com) (21063 Points)
Replied 04 May 2011

as the service tax is paid on full mrp by the company, and you are not getting any commission direct from company either by credit to your account or by cash/cheque,

the transaction is done by selling of cards to you at discounts and sold by yourself at mrp ( or may be at discounts lower than company offer), so this revenue is your trading turnover profit and you are liable for incometax only on this.

but if company pays or credits any sum directly or directly apart from discounted sale of coupans then that amount would be subject to commission (BAS) and would invite service tax.

4 Like

Sundaresan (Sr. Manager- Finance) (37 Points)
Replied 04 May 2011

Dear Friend,

Generally the mobile operators themselves pay the service tax on the denomination of the voucher eventhuogh they sell it for a lesser value to the distributor.

Since the entire value is covered and service tax paid by the operator, the Distributor is not liable to pay service tax. This is a well settled case.

1 Like

Vivek Agrawal (Student) (82 Points)
Replied 22 June 2012

The Recharge Voucher Distributors get a trading income by purchasing vouchers from mobile companies and selling those vouchers to retailers. They get extra commission income from the company on the targets achieved by them. The company adds service tax on the commission paid and credits the commission + service tax to the distributors account. In some cases the distributors may not reach the limit of 10 Lakh. As the distributors have to take service tax registration no. in order to get the distributorship, they have to file the service tax return also.

My questions are

1) If the commission income + service tax paid by the company is below Rs. 10 Lakh, does the distributor has the liablility to deposit service tax.

2) How is the service tax return to be filled by the distributor, he has to show only commission income or the voucher purchase and sale also.

R.Subramanian (ITP) (27 Points)
Replied 11 October 2012

Dear sir,

The Vodafone Distributors Purchase Prepaid Card From Vodafone Company, MRP is Rs.10, but the Company paid service tax at the rate of MRP. we are not getting any commission direct from company either by credit to our account or by cash/cheque. this distributors is liable to servicetax or not

Nitin (CA practice) (436 Points)
Replied 06 December 2012

It will be better if we can have few more expert opnion as i feel on the basis of above dicsusion still the position is not v clear ,further here i would like to get a clarification that if it is trading profit ,mean it is trading activites ,is distibutor need to charge VAT on it ?Further In case the coupoun sale is only online not offline ,will things can change in our discsussion.Is Distibutor at all need to get register for Serice tax if his business exceed the turnover limit ? if no ,means for Distibutor their is no liability towards service tax or VAT ?Can have some comments with following eg.Operator A has one distirbutor X ,who gave right to Y ,Z ,P ,Q thru onsite to enable them to recharage the coupon and these Y ,Z ,P have further given right to small retailers .Now as same case operator A gives 100 rs coupom who again pass on the same to Y and y to next level and their remuneration come in the form of kind only means they get some free value for which they can charge to their customer without paying to their respective vendors and from their respective vendors ?

Sanjay Kumar Murarka (CA in Practice) (21 Points)
Replied 18 March 2013

While the service is under BSA is taxable, whether exemption of small service provider available?whether the service is under Brand/trade name ?

CA ANKUR AGRAWAL (PARTNER) (34 Points)
Replied 09 February 2014

The Distributor is not required to pay any service tax on the diff of Rs. 5 because, when he purcahse that coupans, he should book it as input service @ 95 and when he sales the same he should book it as output service of Rs. 100. And as per notification 25/2012, distributor is exempt from liability of service tax on such sale.

1 Like

VISHALKUMAR RAJKUMAR RAJPAL (Student CA Final ) (36 Points)
Replied 19 February 2014

But what about section 194 H of Income Tax Act.As soon as mobile operator deduct the the Tax at source under the above head as commission paid to the distributor, he is bind to book that income as a commission income.And as he book the income as COMMISSION income there arises a question of Service Tax under the head Business Auxiliary Services(BAS).Please guide...

Biren Shah (Prop.) (23 Points)
Replied 28 February 2014

At present Service tax is applicable on commission of Mobile Recharge coupon or sim card sales ?

Gaurav (Business) (22 Points)
Replied 20 April 2014

Originally posted by : VISHALKUMAR RAJKUMAR RAJPAL
	But what about section 194 H of Income Tax Act.As soon as mobile operator deduct the the Tax at source under the above head as commission paid to the distributor, he is bind to book that income as a commission income.And as he book the income as COMMISSION income there arises a question of Service Tax under the head Business Auxiliary Services(BAS).Please guide...

Telecom companies do not deduct TDS on recharge coupan margin. They deduct TDS on other commission which they give on some monthly/quarterly/yearly targets and other schemes. So I think only on this commission service tax is applicable under BAS.

muhammad Shoaib (Student CA Final ) (35 Points)
Replied 10 August 2014

If XYZ Mobile operators gives a recharge coupon of Rs. 100 to its distributor @ Rs. 95/-. .and XYZ gives commission to distributor. and further distributor gives recharge coupon to retailer and paid Rs.1 as commission. and retailer gives this coupon to customer for Rs.100.
1.In this case, what will be the amount of service tax of distributor.?
2.if commission paid to retailer, any amount will be deducted from service tax..?

plz spread ur knowledge