CA Swapnil Munot

In order to promote the Exports, Government of India has given big relief to industries in India, by exempting the service tax on commission paid to overseas agent for Export of Goods vide Notification No 14/2014 ST dated 11th July 2014. It is welcome and much needed move, considering global completion. 

Earlier exemption was there on Commission paid to overseas agent for Export of Goods but it was conditional and upto prescribed limited. But now from 1st October 2014, it is out of purview of service tax.

Taxation of Commission agent service dealing in goods was governed by Rule 3 of Place of Provision of Service Rules 2012 upto 30th September 2014. As per said Rule 3, Service will be deemed to be provided at the location of ‘Service Recipient’. However vide Notification No 14/2014 ST dated 11th July 2014, government has amended Rule 2(f) read with Rule 9 of the Place of Provision of Service Rules 2012, by replacing definition of Intermediary, to include, commission agent dealing in goods. Hence from 1st October 2014, Taxation of Commission agent service dealing in goods will be governed by Rule 9 of Place of Provision of Service Rules 2012. As per said Rule 9, Service will be deemed to be provided at the location of ‘Service Provider’. Analysis of changes in definition of Intermediary is as under:

From 1st July 2012 to 30th September 2014 From 1st October 2014 onwards
“intermediary” means a broker, an agent or any other person, by whatever name called, who arranges or facilitates a provision of a service (hereinafter called the ‘main’ service) between two or more persons, but does not include a person who provides the main service on his account “Intermediary”‖ means a broker, an agent or any other person, by whatever name called, who arranges or facilitates a provision of a service (hereinafter called the ‘main‘ service) or A SUPPLY OF GOODS, between two or more persons, but does not include a person who provides the main service or supplies the goods on his account
Analysis: Prima facie this definition deals with intermediary dealing in provision of services like Recovery Agent Analysis:Now Intermediary will also include intermediary dealing in goods that is commission agent.

 However for commission services provided by agent located in India to person located outside India for Import of Goods in India is taxable service from 1st October 2014, which was out of purview of service tax upto 30th September 2014.

Summarized position of‘Taxation of commission service on Import-Export of goods’, under erstwhile and new provision is explained as under:

Type of Commission Service Location of Service Provider Location of Service Receiver Applicability of Service Tax from 1st July 12 to 30th September 2014 Applicability of Service Tax from 1st October 2014
(A)Commission Paid for facilitating sale of goods exported. Outside India In India As per Rule 3 of POP Rules 2012, Place of provision is location of service receiver . 

However partial exemption was provided by Notification No 42/2012 ST dt 29th July 2012.

 

Hence it is taxable service with some exemption.

 

Notification No 14/2014 ST dt 11th July 2014 amended Rule 9 of POP Rules 2012 by amending definition of Intermediary. 

Hence from 1st October 2014, As per Rule 9 of POP Rules 2012, Place of provision is location of service provider.

 

Hence it is not taxable service.

In India In India Taxable Taxable
(B)Commission Received for facilitating sale of goods imported In India Outside India As explained above, as per Rule 3 of POP Rules 2012, Place of provision was location of service receiver. 

Hence it is not taxable service.

As explained above, from 1st October 2014, as per Rule 9 of POP Rules 2012, Place of provision is location of service provider. 

Hence it is taxable service.

 

In India In India Taxable Taxable

 With the changes in these provisions, the position is now exactly reversed, that is, what was taxable earlier now it will be not be taxable and vice-varsa

In such transitionally period of changes in position of service tax on ‘commission agent dealing in goods’, care is to be taken for transaction executed, considering Place of Provision Service Rules 2012 and Point of Taxation Rules 2011.

(The Author is member of ICAI. He can be reached at munotswapnil@gmail.com)

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32 responses to “Service Tax on‘Commission Agent Service’ on Import-Export of Goods”

  1. yogendra says:

    we are food grain,pulses,oil seeds canvassing agents(broker),
    wether we have to pay servicetasx or not,
    pl reply me.

  2. Karan Shah says:

    What would be Service tax implication for the following scenario.
    – Commission received from foreign company for sale of goods.
    – The goods are sold to another foreign company.
    – Neither goods are imported or exported from India. transaction done through High-Sea Sale.

    • G Lakshmi Narsaiah says:

      We sell wire and cable machinery and spares in India and outside India on behalf of foreign principals and receive commission. Our question to you is that,
      it is taxable with effect from 1.10.2014 and if the goods are supplied to foreign buyers without import in India, then also the commission is taxable also.
      The second question is we receive meager commission from all sources amounting to Rs.5 to 8 lakhs. Are we eligible to avail small scale exemption for small providers of services up to 10 lakhs. Please reply

  3. Kapil Kumar says:

    Hi, I am working as a service provider and running buying agency for our foreign clients.
    We help them sample,provide merchandizing services and quality inspection of goods they buy in India from Indian factories. We recv our payment from our foriegn client. Is service tax applicable on us,if yes under what heading of service tax we need to register. And what conversion rate to follow for payment. Thanks

  4. SHUBHAM AGARWAL says:

    HELLO ALL,

    I AM A CONSIGNEE AGENT . MY SUPPLIER SEND ME GOODS FROM MUMBAI I SELL IT IN THE PURCHASE RATE HE GIVES ME MY COMMISSION SEPARATELY . I HAVE TO BORNE AND PAY SERVICE TAX ACCORDING TO OUR CONTRACT BUT MY FINANCIAL ADVISER SAYS ONLY TO PAY SERVICE TAX IF COMMISSION EXCEEDS 10 LAKHS FOR THAT YEAR.

    WHAT SHOULD I DO SHALL I PAY SERVICE TAX OR SHOULD I PAY IT AFTER MY COMMISSION EXCEEDS 10 LAKHS

  5. Hansal Modi says:

    Dear Sir,
    i act as a commission agent for the suppliers who are located in Taiwan. I sell their goods on commission to the importers here in India. I get the commission from my Taiwanese suppliers. So am i liable to pay service tax. Both my buyer and supplier are not ready to bear the service tax cost, so if in case i have to pay then it will be completely from my pocket. In that case i end up paying so much tax. For instance if i earn $100 as commission from the Taiwan supplier, then firstly i need to pay 14.5% Service Tax. Also i will have to pay say 30% Income Tax on this amount. So i end up paying in all 14.5% + 30% = 44.5% to the government only. I feel as if i am earning only for the govt of India.

    Can i have a clarity on this point as it might encourage many commission agents to get the commission in black money to avoid the unreasonable taxes charged by the government.

    Awaiting your feedback.

    Regards,
    Hansal Modi

    • Sidz says:

      Hii

      DId you got any reply to your post???

      • syam Sunder P says:

        Dear Sir,’

        Our position is still worst. after paying 15% service tax , 33% Income tax, have to pay 17% divident tax further 10% divident tax in individual hand. ours is a pvt ltd company. there is no option left other than opening over seas office or change company to partner ship.

        Syam

  6. Mukul Ved says:

    Commission paid for export sales specially to company located in foreign land and located and giving service at place where goods are exported shall be considered as service provided at foreign land and not chargeable to service tax But in Service Tax laws notification circulars are framed in such manner that nobody can interprate anything even person drafted auch thing

  7. Rajnish Kumar says:

    I import shipments on exworks basis from Germany. Do I have to pay service tax in India on the Ex Works charges. We are paying customs duty as well as Service Tax on Ex works charges. Isn’t it double taxation.

    Kindly reply at the earliest

    If there is any notification link which can prevent ST on Exworks charges, kindly procvide same

    Regards

  8. PARAS JAIN says:

    HELLO SIR,

    I AM A SALARY PAID EMPLOYEE IN MY COMPANY,

    NOW I AM ENTER INTO A CONTRACT WITH MY COMPANY TO FIND CUSTOMER FOR COMPANY AND ALSO PROVIDE ALL SERVICES TO CUSTOMER AND THEN FINALLY BILL WILL BE RAISED TO CUSTOMER BY COMPANY IT SELF.

    AND COMPANY WILL GIVE ME 50% OF NET PROFIT EARN TO COMPANY SUCH CUSTOMER

    QUERY : –
    1. WHETHER SERVICE TAX ACT WILL BE APPLICABLE TO ME
    2. IF ANS. IS YES OF ABOVE THEN PLS MENTION LIMITS IN AMOUNT AFTER WHICH SERVICE TAX
    WILL BE APPLICABLE.
    3. AND WHAT I SHOULD DO TO PREVENT FROM ANY TYPE OF PENALTY

  9. Vikas Sharma says:

    Dear Sir / Ma’am,
    Greetings of the day.

    I am working as a commission agent for export and import.
    now i am going avail some commission from abroad.
    Please do let me know about the process and related details.
    Can i ask to transfer the payment in my Indian account?
    I should ask to send through Western Union and other agencies ?

  10. Rajeev T says:

    Hi, I run a garment and home goods buying agency for foriegn clients.
    We help them sample,provide merchandizing services and quality inspection of goods they buy in India from Indian factories.
    We raise a service invoice which is a percentage of the export value of the goods. We recv our payment from our foriegn client. Is service tax applicable on us,if yes under what heading of service tax we need to register. And what conversion rate to follow for payment. Thanks for yr reply.

  11. Prateek Bhatt says:

    Hi

    We propose to be a sales commission agent in India for locally manufactured products. Can we collect the advance money from Distributors in India, on behalf of the partner companies/brands and remit the net amount (after deducting our commission) to the partner companies/brands for execution of orders ? Is such an arrangement possible ?

  12. Anish says:

    Hello All
    I am not to find the reply on my question anywhere

    We run an online portal by facebook and import fashion goods on request from customer
    customer pays us & our suppliers sends us & after all clearance the product is delivered to specific customer.
    We do everything on order, our CA says that you just have to pay service tax on our commission you get

    Kindly guide

  13. Bhupinder Saini says:

    Hi!
    I have one question. Our company situated in India help the “buyer” (situated outside India) to purchase goods from “suppliers” (suppliers situated in India). So, suppliers in India exports goods to buyers situated outside India.
    Buyer being the service receiver, pays us (Indian company) a commission in foreign currency.
    Is this commission taxable under Service Tax new rule? Please keep in mind that the goods are NOT being imported in India BUT they are being exported.
    Can any expert confirm?
    Thank you,
    Bhupinder

  14. Deepak Lahoti says:

    we are provide service to other country company as a agent, some customer in India and some in outside, in that case what we do, with our work Foreign Currency come to India, Govt. charged Service tax on us, and give lots of benifit to export, our and export work is same, with our work foreign currency come than why govt do such thing with service provider

  15. Pramod says:

    Hi,
    We are also providing services to overseas clients. We buy goods overseas and sell overseas and get commission in India. Obviously we cannot charge service tax to buyer or supplier who are located outside India.
    The principle of export is very simple that we can export goods or services but cannot export taxes. This provision goes to contrary of government policy of exporting services.
    The notice has been issued in haste without application of mind. To correct one mistake they have created a new problem for service exporters who are bringing in precious foreign exchange in India.

  16. Priya Rajarajan says:

    1. In our case seller of goods and purchaser of goods both are situated outside India. We help them to close deal and getting commission for trading of such goods.
    2. We provide service to the client situated abroad as mentioned above and getting commission in convertible foreign exchange.
    3. This transaction is not Import as goods are not arriving in India.
    4. Our service consumed outside India and by nature it is pure export of service.

    I need to pay 2 more brokers who are foreigners.Is there any limitation in paying foreign agents?

  17. praveen says:

    sir
    is there any inclusions or deletions in No 14/2014 ST in budget 2015 ?

    awaited for your favorable reply

  18. Vikrant Apte says:

    The commission paid to the overseas commission agent who is situated outside india and who is providing service on behalf of indian Principal manufacturer to the Overses commission agent.

    Service tax payment is not require to be paid to the indian principal as per POP Rule 9 w.e.f 01/10/2014

  19. R K says:

    Hi

    We are explaining our nature of activity in brief for your kind advice.

    1. In our case seller of goods and purchaser of goods both are situated outside India. We help them to close deal and getting commission for trading of such goods.
    2. We provide service to the client situated abroad as mentioned above and getting commission in convertible foreign exchange.
    3. This transaction is not Import as goods are not arriving in India.
    4. Our service consumed outside India and by nature it is pure export of service.

    We have to draw your kind attention that the Govt. has made amendment in Place of Provision of Services (Amendment) Rules 2014 notified vide Notification No.14/2014-Service Tax which is effective from 1st October 2014.

    You are kindly requested to provide us guidelines whether we are liable to pay service tax or not on the above mentioned activity looking to the said amendment.

  20. Ram Kishan says:

    As per notification 42/2012 commission paid to overseas agent is exempt under some condition. Now, the notification 42/2012 has been redundent.

    Whether we should required to file half yeary service tax return EXP-4 under noltification 42/2012.

  21. ROHIT SOMANI says:

    We have done some transaction for supply of goods from outside India to the byuer who is also outside India. here we will receive commission on the transaction and we are located in India. This transaction is not Import as goods are not arriving in India. Since the rule is changed for Provider of service rules shall we will be liable to pay service tax on such amount as we will be receiving the amount in India as we are located in India even though it is export of service.

  22. g.balakrishnan says:

    i agree with bhasvesh comment

  23. Nikhil says:

    I am a freelancer and running a website, and accepting payments via Paypal, and I am not accepting any payment from India and not having customers in India because PayPal doesn`t support inside INDIA, can any one expert let me know, do I need to pay service tax or not. yearly income is more then 10 lk

    Thanks in advance.

  24. CA Bhavesh Mange says:

    Even When an organisation is exporting or providing services to client Outside India, as per POP rule 9 “The location of Service Provider” is the criteria to tax the transaction.

    Now, When any organisation is exporting services , it brings Foreign Exchange & contribute to forex reserves of the country , thereby helps in strengthening A Rupee. But govt. wants to tax them as well . I don’t know Why such a provision is enacted against the interest of the country ? These export organisations are frustrated by the policies of Govt. on taxation.

    Also, this king of complicated rules makes the tax structure complex & increases the litigations. Business houses wants to do business and not to involve their time & money in these kind of litigations.

  25. g.balakrishnan says:

    may be these muddle is to give some useless work to professionals as also to department may be it is like new jobs generation may be under consumption of jobs like consumerism, great India great confusion!

  26. g.balakrishnan says:

    why can’t these great notifications be simple? if not simple, department does not know how to simplify as every thing works on promotion of exports in the interest of economy and economic development . All participants do promote exports of govt policy when so why they cannot be simply exempted instead of ;ifs and buts’!
    I see finance ministry is a great confused muddle in India it seems, and it puts all concerned in all kinds of doubts!

    so any prospective acts/notifications need to me meaningful instead of confusing like some cross articles written by any writer!

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