17 February 2011
company A ask company B to construct Godowns for A under its(B) supervision on 10% commission basis of total cost as B has the expertise/ know how to construct the godown. B give the contract to C to construct the godown under B supervision.
Here query is the 10% commission taken by B from A on total cost of Godown is chargeable under Consulting Engineers service, if not under which service it is to be liable to service tax.
18 February 2011
AS CONSIDERATION IS 10% Commission , all commission would fall in Business Auxiliary service
business auxiliary service” means any service in relation to, — (i) promotion or marketing or sale of goods produced or provided by or belonging to the client; or (ii) promotion or marketing of service provided by the client; or
Explanation.— For the removal of doubts, it is hereby declared that for the purposes of this sub-clause, “service in relation to promotion or marketing of service provided by the client” includes any service provided in relation to promotion or marketing of games of chance, organised, conducted or promoted by the client, in whatever form or by whatever name called, whether or not conducted online, including lottery, lotto, bingo; [Explanation inserted vide Finance Bill 2008 w.e.f. 16th May, 2008]
(iii) any customer care service provided on behalf of the client; or (iv) procurement of goods or services, which are inputs for the client; or Explanation.— For the removal of doubts, it is hereby declared that for the purposes of this sub-clause, “inputs” means all goods or services intended for use by the client; (v) production or processing of goods for, or on behalf of the client; or (vi) provision of service on behalf of the client; or (vii) a service incidental or auxiliary to any activity specified in sub-clauses (i) to (vi), such as billing, issue or collection or recovery of cheques, payments, maintenance of accounts and remittance, inventory management, evaluation or development of prospective customer or vendor, public relation services, management or supervision, and includes services as a commission agent, but does not include [* * * * ] any activity that amounts to “manufacture” within the meaning of clause (f) of section 2 of the Central Excise Act, 1944 (1 of 1944). [Omitted vide Finance Bill 2008 w.e.f. 16th May, 2008]
Explanation. — For the removal of doubts, it is hereby declared that for the purposes of this clause, — (a)
”commission agent” means any person who acts on behalf of another person and causes sale or purchase of goods, or provision or receipt of services, for a consideration, and includes any person who, while acting on behalf of another person —
(i) deals with goods or services or documents of title to such goods or services; or (ii) collects payment of sale price of such goods or services; or (iii) guarantees for collection or payment for such goods or services; or (iv) undertakes any activities relating to such sale or purchase of such goods or services;
as service is related to expertise knowledge hence can be consider under Consultancy Service also
20 February 2011
It appears that the supervising the construction activity as an expert in Civil activity would attract Service Tax under Consulting Engineer Service only.
21 February 2011
Sir you are right , but in general supervision charges or consultancy are fixed remuneration and not in % based , it is my view, not necessary you may agree, as on the basis of remuneration, it appears it should be considered undere business auxiliary .
it was held during audit with other assess in the field of Consutruction activity
25 February 2011
first, check out the agreement. from your query it appears that this case is covered under sub- contracting. check it out what is the mode of payment, if whole payment of project is paid by B to C and B recovers from you in addition to 10% commission. then it is civil construction/works contract. if you make payment directly to C, then it is contact between you and C and B gets only consultancy charges. then these are two different transactions. analyze these things and then revert to me at tkg1968@rediffmail.com.
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