Service tax applicability?

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A client has a hotel in India, sometimes he gets guests through an online booking agent based in a foreign country. My client pays commission to that agent as fixed percentage of room rent received.

Last month Service Tax department sent a notice to client to pay service tax on amount of commission.

Is this payment taxable under service tax rules?

Please help. If need more information, please ask.

Thank you in advance. 

Replies (1)

Dear,

Actually in this case the service receiver is the Hotel and the Service Provider is the agent who is located in Non Taxable Territory i.e; outside India .

As the agent situated abroad obtains booking and forward the orders to India for execution.Since benefit of service is received in India , it is import of service and Indian hotel is liable to pay ST.

As per Rule of ST when the service provider (Agent) is in non-taxable territory (outside India) and service receiver (Hotel) is in taxable territory (India), the service tax is payable by the service receiver.

You can refer Rule 2(1)(d)(iv) of Service tax rules.

Thanks,

Sandeep

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