Service tax

This query is : Resolved

ammy raheja (Querist)
Follow

05 February 2016 If my client is having distributor ship of idea cellular which provides recharges to retaillers then is there a service between distributor and company[idea)?

CA Harish Suwalka

CA Harish Suwalka (Expert)
Follow

06 February 2016 Yes the service is of Commission agent i.e. business support services.

ammy raheja

ammy raheja (Querist)
Follow

10 February 2016 What will be the taxable value?

Asha Kanta Sharma

Asha Kanta Sharma (Expert)
Follow

24 July 2025 In your client's case — acting as a distributor for Idea Cellular and providing recharges to retailers — the nature of the transaction is considered a "commission-based intermediary service", typically falling under Business Auxiliary Services (pre-2012) or Business Support Services, and later under Intermediary Services in GST.

✅ Taxable Value in Service Tax (pre-GST era):
Definition of Taxable Value:
As per Rule 6(1) of the Service Tax (Determination of Value) Rules, 2006, the taxable value is the gross amount charged by the service provider for such service rendered.

🔹 In Your Client’s Case:
If the distributor receives commission or margin from Idea Cellular (e.g. ₹5 on every ₹100 recharge sold),

Then that commission amount alone is the taxable value.

✅ Not the full recharge value (i.e., not ₹100),
❌ Only the commission/margin (₹5) is subject to service tax.

📌 Example:
Description Amount
Recharge MRP ₹100
Purchase price from Idea ₹95
Distributor margin ₹5
Taxable value ₹5 only
Service tax (@14%) ₹0.70

So, your client pays service tax only on ₹5, not on the recharge value.

You need to be the querist or approved CAclub expert to take part in this query .
Click here to login now