Service tax on commission payment

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Panneerselvam

Accounts Officer

44 Points Posted on 04 April 2016

We are doing Yarn Sales Commission agency business. We are getting Commission in every 6 months once. At the time of commission receipt our supplier is deducting any unpaid amount from his customer (marketed by us) will deducted and paid balance commission amount.

1) We are commission agency - A

2) Customer Yarn supplier - B

3) Buyer Yarn buyer - C

Eg: 1) Sales commission receivable from A - from April 15 to September 15 - Rs.10,00,000/-

2) Buyer -C Not paid yarn purchased balane amount Rs.2,50,000/- for January 2015.

3) Debit note received from A for non payment of C Rs.2,50,000/-

4) Commission Amount Received from A - Rs.7,50,000/- in April 2016.

My Quaries:-

1) We have paid Service tax upto February 2016. Can we adjust that deducted amount's(Rs.2,50,000/-) service tax in March 2016 Service tax payable?

Eg: 1) March 2016 Service Tax payable Rs.72,500/-(Rs.5,00,000 /- @ 14.5%)

2) Deducted amount service Tax Rs.36,250/- (2,50,000/- @ 14.5%)

Kindly clarify as per Service tax act can we eligible to adjust. If possible please give notification or caselaws and as per above said our adjustment working is correct.

P.Panneerselvam

Replies (2)

CMA Poornima Madhava

CMA

9106 Points Posted on 04 April 2016

Your query is ambiguous.

If A is commission agent, why and whom would A pay commission (because you have mentioned commission receivable FROM A)? Do you mean receivable BY A?
If C has not paid dues to B, why is A raising debit note (or do you mean credit note to C raised by A? or is it raised by B to A?)

Vikas

1245 Points Posted on 05 April 2016

Rule 6(3) of the Service Tax Rules 1994 reads as under-

“Where an assessee has issued an invoice, or received any payment, against a service to be provided which is not so provided by him either wholly or partially for any reason, or where the amount of invoice is renegotiated due to deficient provision of service, or any terms contained in a contract the assessee may take the credit of such excess service tax paid by him, if the assessee -

has refunded the payment or part thereof, so received for the service provided to the person from whom it was received; or
has issued a credit note for the value of the service not so provided to the person to whom such an invoice had been issued.”

Thus, if the deduction of Rs.2,50,000/- is as per the terms of the contract, then only the proportionate Service tax paid in excess can be taken by you.

Apart from the above, I must there are timing issues regarding point of taxation for payment of Service tax. You need to consult an advisor.