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Regarding tds and service tax on commission

P. Shah (Accountant) (207 Points)

11 June 2016

I have confusion regarding commission. suppose if any dealer is having agency and doing business on commission basis and commission income also exceeded the TDs limit then whether tds is applicable or service tax and how it works

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Harshit Kabra (INVESTOR) (Student CA final) (1113 Points)
Replied 11 June 2016

(a) "Commission Agent"means any person who acts on behalf of another person and causes sale or purchase of goods, or provision or receipt of services, for a consideration, and includes any person who, while acting on behalf of another person -(i) deals with goods or services or documents of title to such goods or services; or(ii) collects payment of sale price of such goods or services; or(iii) guarantees for collection or payment for such goods or services; or(iv) undertakes any activities relating to such sale or purchase of such goods or services;

further,

TDS on Commission/
Brokerageis required to be deducted underSection 194Hby the person making the payment by way of commission or brokerage. TDS on Commission/Broker is required to bededucted @ 10%at the time of:-1.Making such payment or2.Credit of such income to the account of the payee in the books of the person deducting such TDSwhichever is earlier.The Rate of TDS has been reduced from 10% to 5% in Budget 2016. This revised rate wouldbe applicable from Financial Year 2016-17.

so it is clear that if a agent is earning income on the basis of commision then it is treated as business income and if material is also supplied by such agent then he will add VAT on supply of such materialt as a agency service then he is option to opt for 44AD and assume 8% of his total turnover should be treated as income from b&p.

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Harshit Kabra (INVESTOR) (Student CA final) (1113 Points)
Replied 11 June 2016

sorry here is continue, --
and after that when he gets commisiion then such principal will deduct 10% as TDS on recipt of such commission.

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Harshit Kabra (INVESTOR) (Student CA final) (1113 Points)
Replied 11 June 2016

here, 194H already covered for service tax - As saying that Commission or brokerage includes any payment received or receivable, directly or indirectly, by a person acting on behalf of another person:

(a) for services rendered (not being professional services), or

(b) for any services in the course of buying or selling of goods, or

(c) in relation to any transaction relating to any asset, valuable article or thing, not being securities.

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Harshit Kabra (INVESTOR) (Student CA final) (1113 Points)
Replied 12 June 2016

here, i updated, that service tax shall be applicable on this question, as well TDS is also applicable, but for ur clarification tds shall not be cut on service tax amount but only on tax on gross receipt of commision as the rate applicable, sorry for my wrong reply earlier to u.

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