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Service tax query

Kamal Kumar (self employed) (62 Points)

08 July 2012

Dear Learned Sirs/Madams,

I am a representative to promote the products and services of a USA based Co. for which I get commission in US $ paid by USA Co.

Basically,I get airplane parts sent from India to my USA Co. for repairing & replacing with new parts.Indian airlines Cos. pay directly to USA Co. for repairing & new parts.All dealings & billings are between India based Airlines & USA based Co.I am just a co ordinator.

Now,my query is: Am I liable to pay service tax above 10Lakh of commission amount?

Kindly, reply to my query as I am a layman and even my CA has no concrete answer.

Anxiously waiting for your valuable reply.

Thanks,

Kamal Modi

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4 Replies

CA MOHAMMED IRFAN (Chartered Accountant) (136 Points)
Replied 08 July 2012

Mr. Kamal as per the fact provided by you, you are not the employee of USA Co., infact you are providing your services to your USA based client on principal to principal basis. Indeed, you are exporting you service to your USA client.

The service which you are provididing to your client, i.e, "Promotion of Products or Services provided by client" is a service covered under the catagory "Business Auxiliary Service" (Section 65(19) of Finance Act, 1994) and you are liable tfor service tax if your aggregate receipts towards value of srvices renderd exceeds Rs.10 Lakhs during the year (assuming that you are an eligible SSI for the current year i.e, the value of services rendered by you does not exceeded Rs.10 Lakhs during the preeceeding F.Y.).

Futher, you need to take registration within 30 days from the date, when your aggregate value of services rendred by you exceeded Rs.9 Lakhs by making an application in Form ST-1 to the Superintendent of Central Excise..

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Ajit kumar Dubey (Taxation Manager) (637 Points)
Replied 09 July 2012

You are providing services to a person based on non taxable territory of India, so you are not liable to service tax, provided you receive remittance in foreign currency. There is no limit for availing the exemption. The present scenario of service tax law has changed and hence the view of Mr. Irfan does not stand proper.

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Prateek Agarwal (Sr. Executive - Finance & Accounts) (1732 Points)
Replied 17 July 2012

In case of erstwhile Business Auxiliary Service, commission agents were exempted from the purview of service tax.

In the present scenario also, you are receiving the money in convertible foreign exchange. It is an export of service and hence, not liable to service tax.

As per my view, your commission income is not taxable.

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Ajit kumar Dubey (Taxation Manager) (637 Points)
Replied 18 July 2012

If you are providing services in the form of intermediaries and not providing any service in your personal capacity then it would be taxable in India,as the same is excluded from Export of service wef 01-07-2012, provided that you are acting on behalf of an Indian Company.

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