LIVE GST Audit Course by CA Sachin Jain. Register Now!!

service tax on revenue sharing

mukundasy (manager) (97 Points)

20 April 2009

Sir,

With reference to the latest updates on the service tax applicability on movie theatres, I would like know whether any type of revenue sharing transaction falls outside the purview of service tax.

We had plans of paying to our agent as commission for the client search for our products sales. please let me know if an agreement can be made between our company and the agent as revenue sharing basis and try to avoid service tax. Also let me know if this type of transaction attracts any other type of taxes

With Regards,

Mukunda

Reply
Follow
Share

3 Replies

Madhukar N Hiregange (Chartered Accountant) (38934 Points)
Replied 20 April 2009

In my view the essensce of the transaction would go to prove what it is. Once the essence is of taxable service then the measure ( fixed, flexible, revenue share, based on cost + etc would be how the monetary compensation is to be arrived at.

However where there is a JV or a SPV where the parties join and agree on certain terms to share the profits and losses then the ST would not be applicable.

lakshmi (99 Points)
Replied 11 July 2009

I have a typical query. A multiplex is housing various restaurants on the revenue sharing agreement. Which means a fixed percentage of revenue is given to the multiplex owner. There is no rent payable by the tenant. Department claims that the revenue sharing is nothing but rent and other amenities provided by the owner and demands service tax on the entire income earned by way of revenue sharing agreement. Is that correct.