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Service tax on dealer margin income

rajdip ranpara (proprietor) (139 Points)

17 September 2015

My client is a dealer of Automobile of company of commercial vehicles and generally he is purchasing vehicle from company and selling to customers, he had received dealer margin income which was actually his profit which was transfered by company for direct selling vehicle to customer by company.

Company has deducted TDS on that dealer margin income u/s 194H(commission income).

Does that dealer margin income attract Service tax , which was actually not commission but profit transfered and we have statement received from company which showing as dealer margin income.

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9 Replies

Prabhat Kumar (Advocate & Consultant) (1912 Points)
Replied 17 September 2015

Tradibg of goods does not attract Service Tax (Section65D of the Finance Act).

vishal (AM) (34 Points)
Replied 17 September 2015

It is commission income and will attract service tax if dealer is not fall in exemption limited

Zarra.Belal.Nomani (CS Final B.com CA Final.) (167 Points)
Replied 18 September 2015

Yes it is liable for service tax as clearly indicated from facts that it is a commission income . However if you are purchasing cars from manufacturer and thereafter selling them in profit & not commission : it will not attract service tax .

sudhakar (D) (22 Points)
Replied 18 September 2015

Deduction us194h clearly signifies that Maruti treat as commission paid to the dealer. It is not but and sale transaction and there it is service given to the manufacturing co..

jaya krishna (Chartered Accountant) (262 Points)
Replied 18 September 2015

It is clearly stating that Tds deducted under section 194 h so he is liable charge service Tax on commission if the commission exceeds 10lacks during this year..

Niraj Kumar Sinha (Sr. Officer, SPSIL) (648 Points)
Replied 18 September 2015

In my view, if bill for purchase is prepared in your client name and then your client prepare bill in the name of Customer then it is purchase and sales and margin amount should be treated as profit and no service tax will be charged.

And if Bill is prepared by the Automobile company in the name of Customer (not in the name of your client) then it is commission income.

rajdip ranpara (proprietor) (139 Points)
Replied 18 September 2015

actually in routine we purchase and then after we sell to customers, but only this time company has directly supplied vehicles to customer and issued invoice in customer's name, and transfered our part of profit as dealer margin income to us.

that was clearely written in statement of company that it was dealer margin for the vehicle directly supplied to so and so customer.

rishabh oswal (n.a) (85 Points)
Replied 20 September 2015

Generally dealers have to deposit require amount(no. Of car * price per car) as co. Receive order. So co. Getting money (consideration)from dealer. So i think it is pure trading.

Madhukar N Hiregange (Chartered Accountant) (38934 Points)
Replied 21 September 2015

Mr. Nirajs analysis is correct. Generally you say vehcile is purchsed and then sold- in that case no servic etax.

When Co sell directly and give margin to dealer, then it is a facilitating service. It is liable to ST if the basic exemption of Rs. 10 lakhs in not available to dealer. In this case clear that liability exists.