Applicability & valuation of service tax on commission

This query is : Resolved

K V VARADHARAJAN (Querist)
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23 January 2013 A manufacturer (X) is supplying material directly to a customer (Y) in the same state under VAT against an order received through a dealer (Z). Z is involved in the transaction to get the order to the manufacturer for this supply. Z also pays money to X for the sale proceeds for which Z also receives commission from X. T
he dealer (Z) in turn realises the money from Y directly against a debit note.
Please confirm applicability of service tax on this service of Z to Y. What would be the service component on which this service tax is applicable ?
Similarly when Z is raising a debit note for commission to X should he charge service tax?

Jayant Bothra

Jayant Bothra (Expert)
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23 January 2013 Dear KV Varadharajan

As per the query asked by your good self I am of the opinion that the commission earned by the Mr. Z from Mr. X falls under :Business Auxiliary Services" reason being he is facilitating him for sale of goods. SO it clearly a business auxiliary service.
Now, for the payment received by Mr. Z from Mr. Y, to this there is no service provided the consideration received is simply towards the sale of goods and sale of goods is exempted from service tax under negative list.

CA JAYANT BOTHRA
M: 9911-550-210

K V VARADHARAJAN

K V VARADHARAJAN (Querist)
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24 January 2013 Dear Mr.Jayant Bothra,
Thanks for the promot response.

The payment claim by Mr.Z is being made from Mr.Y by way of a debit note for the sale done by Mr. X to Mr.Y directly
Can Z raise a debit note on Y for this purpose - please clarify and confirm that still no service tax would be applicable...
Thanks and regards

Jayant Bothra

Jayant Bothra (Expert)
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24 January 2013 Dear Sir,

The payment received by Mr. Z is forwarded to Mr. X against which he is getting commission. So, ultimately Mr. Z is giving services to Mr X. Further, Mr Z is not charging any thing extra from Mr. Y apart from the goods consideration.

The payment which Mr. Z is receiving is on the behalf of Mr. X only. NO SERVICE TAX IS APPLICABLE ON THE CONSIDERATION RECEIVED BY MR. Z FROM MR Y

Thanks & Regds
CA JAYANT BOTHRA
M: 9911-550-210

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