Applicability of service tax or vat

This query is : Open

CA Aankit Kumar Jain (Querist)
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02 May 2012 Dear All,

One of my friend runs an automobile agency.
Where he books bikes for his clients.

He collects cash and cheques from his client and gives it to Kinetic Company.

The Company gives Bill directly in the name of owner.

Now in this situation what will be applicable to him.

When he receives cheques from clients he gives them the receipt

But he does not purchases bike from showroom in his name, but he issues cheque from hsi bank account.

As he is not purchasing bike, will VAT be applicable?>

And how can service tax be applicable if any.

Sanket Shah

Sanket Shah (Expert)
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02 May 2012 dear friend,

As stated by you, i understand that your friend is collecting money on behalf of company and booking scooters for delivery to customers. the company prepares bill in name of ultimate consumer. Thus it is clear that your friend is acting as an agent between company and consumer. Thus in this case it can be stated that he is providing agency service. and thus service tax will be applicable when he prepares his agency bill on company. the bill prepared by company towards final consumer will include vat.

CA Vibhash Kumar Sah

CA Vibhash Kumar Sah (Expert)
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03 May 2012 Dear CA Ankit Kumar Jain: One thing is not clear- what consideration Automobile agency is getting, i.e. whether Kinetic is paying any commision or the Agency is keeping any profit while booking the bikes for end customer!

Murtaza I Bhagat

Murtaza I Bhagat (Expert)
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03 May 2012 agree with vibhashji,

if your role is only providing money from client to company and company is giving commission on your bike sales and also i think even company may be deducting tds on that commission

if above condition is exact then you don't need to charge vat or service tax on any amount

you just have to book you commission as your income, if there any additional income while transfer money from client to company then also you need to add in your income

CA Aankit Kumar Jain

CA Aankit Kumar Jain (Querist)
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24 May 2012 Dear Vibhash and Murtaza,

The Company Kinetic is not giving any remuneration to the Motor Agency,

and what nature of bill should motor agency give to customers when it gives receipt for the money received from the ultimate buyer....

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