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

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