Reverse Charge Nepal
This query is : Resolved
11 June 2011
Hi,
Commission paid to a dealer in Nepal for procuring export orders whether subject to service tax.
The commission is paid in INR
Please let me know if such transaction would attract service tax under reverse charge
Commission paid to a dealer in Nepal for procuring export orders whether subject to service tax.
The commission is paid in INR
Please let me know if such transaction would attract service tax under reverse charge
12 June 2011
yes this transaction would attract service tax on import of services.
23 June 2011
Dear Mr. Vipin the answere needs to be elabrative with justifications and giving reference of the act.
Your reply does not support your views. I would request to not assign the status as resolved without giving other experts to express their opinion
Your reply does not support your views. I would request to not assign the status as resolved without giving other experts to express their opinion
22 July 2025
Got it! You’re asking about whether commission paid to a dealer in Nepal (a foreign entity) for procuring export orders attracts Service Tax under Reverse Charge Mechanism (RCM) in India, especially when the payment is made in INR.
Detailed Explanation with Legal References:
1. Is commission paid to Nepal dealer an import of service?
Yes. When you pay commission to a foreign entity for services received (like procuring export orders), it qualifies as “Import of Service” under Indian Service Tax law.
Section 2(11) of the Service Tax Law (Finance Act, 1994) defines Import of Services as:
“Import of services means the supply of any service, where
— the supplier of service is located outside India,
— the recipient of service is located in India,
— the place of provision of service is in India, and
— payment for such service is made or to be made in convertible foreign exchange or in Indian rupees.”
Since commission is paid to a Nepal dealer (supplier outside India), and recipient is in India, this falls under Import of Service.
2. Does Import of Service attract Service Tax under RCM?
Yes. Import of services attracts service tax under Reverse Charge Mechanism.
Notification No. 30/2012-ST (or the corresponding Notification in force at the time) specifies that services imported from outside India are taxable under RCM.
3. Is payment in INR relevant?
Yes. Service Tax law covers both payments in convertible foreign exchange or Indian Rupees for import of services.
So paying commission in INR to a Nepal dealer still counts as import of service attracting RCM.
4. Which Section or Notification governs this?
Section 68(2) of Finance Act, 1994 – empowers Government to specify categories of services where service tax shall be paid under reverse charge by the recipient.
Notification No. 30/2012-ST – makes all import of services liable to service tax under reverse charge by the recipient.
Summary
Aspect Explanation
Commission paid to Nepal dealer Considered import of service
Payment in INR or foreign currency Both attract service tax under RCM
Who pays service tax Recipient in India under Reverse Charge
Relevant laws Section 2(11), Section 68(2), Notification 30/2012-ST
Detailed Explanation with Legal References:
1. Is commission paid to Nepal dealer an import of service?
Yes. When you pay commission to a foreign entity for services received (like procuring export orders), it qualifies as “Import of Service” under Indian Service Tax law.
Section 2(11) of the Service Tax Law (Finance Act, 1994) defines Import of Services as:
“Import of services means the supply of any service, where
— the supplier of service is located outside India,
— the recipient of service is located in India,
— the place of provision of service is in India, and
— payment for such service is made or to be made in convertible foreign exchange or in Indian rupees.”
Since commission is paid to a Nepal dealer (supplier outside India), and recipient is in India, this falls under Import of Service.
2. Does Import of Service attract Service Tax under RCM?
Yes. Import of services attracts service tax under Reverse Charge Mechanism.
Notification No. 30/2012-ST (or the corresponding Notification in force at the time) specifies that services imported from outside India are taxable under RCM.
3. Is payment in INR relevant?
Yes. Service Tax law covers both payments in convertible foreign exchange or Indian Rupees for import of services.
So paying commission in INR to a Nepal dealer still counts as import of service attracting RCM.
4. Which Section or Notification governs this?
Section 68(2) of Finance Act, 1994 – empowers Government to specify categories of services where service tax shall be paid under reverse charge by the recipient.
Notification No. 30/2012-ST – makes all import of services liable to service tax under reverse charge by the recipient.
Summary
Aspect Explanation
Commission paid to Nepal dealer Considered import of service
Payment in INR or foreign currency Both attract service tax under RCM
Who pays service tax Recipient in India under Reverse Charge
Relevant laws Section 2(11), Section 68(2), Notification 30/2012-ST
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