Service Tax in Revenue Sharing Model

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Pankaj (Querist)
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17 January 2009 Case:
A telecom which is having its network throughout the city launches a Value Added Service. The Telecom Co. enters into a revenue sharing agreement with a content provider for providing content for this service. Agreement states that Telecom Co. will send bill to the customer and the collection will be shared between Telecom Co. and Content Provider.
Whether Content Provider can ask Telecom Co. to pay service Tax along with revenue share.

In my opinion, the content provider can not ask for service tax since there was one consumer to whom both the companies provided services jointly and therefore charged service tax from the final consumer. Whichever company collects the bill should deposit the service tax collected to Department and remaining amount should be shared between them.

Am i right?

Dayal

Dayal (Expert)
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19 April 2009 The revenue earned by the telcom is subject to service tax which is charged by them and collected from the customer

Now come to the content provider, he is getting a share of the revenue earned by telecom co. the transaction is at arms length , the revenue earned by content provider will be subject to levy of service tax as commission earned by them under BAS.

Therefore the revenue earned should be treated as inclusive of service tax and service tax to be discharged by content provider as telecom company may or may not agree to bear the service tax.

It is how the content provider and telecom company has entered into the arrangement which needs to be evaluated

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