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Service Tax on Commission Agent dealing in Import-Export

Swapnil Munot 
on 19 December 2014

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Service Tax on ‘Commission Agent Service’ on Import-Export of Goods


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 will be 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.

Article authored by

CA Swapnil M. Munot

(The Author is member of ICAI. He can be reached at munotswapnil@gmail.com)


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