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Service tax for commission agents

Hrshikesh (Student) (32 Points)

02 January 2013

A commission agent for a MNC outside India (no business establishment in India) enters into an agreement with the commission agent in India for sale of its products in India. The commission agent would find prospective buyers and route the same to the MNC. MNC in turn would send the product to India to the buyer directly. The agent gets a commission on such routing business. Is this commission received covered under the ambit of service tax?

And, if there are any fixed components apart from the commission on each and every transaction, will service tax be applicable?

Regards,

Hrshi

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1 Replies

MudraMantri (Wantapreneur) (491 Points)
Replied 03 January 2013

Hi Harshikesh,

The service you are referring to squarely comes under the ambit of service tax, under Businees Auxiliary service The Act defines Businees Auxiliary service as:-

any service in relation to, —

(i) promotion or marketing or sale of goods produced or provided by or belonging to the client; .

Hence, this service will be charged under the service tax act.

Further, tax will be charged on the gross amount of consideration, which includes variable as well as fixed component.

Regards.

Fyi:

1) ”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;\

2) For more details refer Section 65 (105) (zzb) of the Finance Act, 1994