An overseas client has an agent in Bangalore. The agent sends students for Commercial Pilot Training overseas. This agent has appointed a third party in Mumbai as its Associate to represent Maharashtra & counsel students so as to send them abroad. Commission is paid by the agent to the third party.
Will the Third Party have to pay Service Tax in respect of the commission received by it from the Bangalore agent?
If yes under which service he will have to pay ST?
Will the service provided by third party be considered as Export of Service?
Also tell me whether the third party will be liable to pay service tax in respect of the commission received by him from the agent:
a) If the agent is a pure agent
b) If the agent is not a pure agent
Please reply as soon as possible as it is very urgent[size=14][/size]
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Replies (7)
The service is taxable in india and liable to service tax it is payable in all cases of agency relationship
ca kaisar imam
ca kaisar imam
pl.give complete address of banglore for my brother.thanks
ANNE PL.GIVE VIA EMAIL rdkakra @ gmail.com the address of banglore
Service tax liability would be arised under the head of Business Auxiliary Service.
It can't be considered as export of service as it is under 'c' category. Service should at least be performed outside india which is common condition for all the categories. In present case, it is very difficult to establish this fact so it can,t be considered as export of service.
Modified Opinion:
Hello Mr.Nikhil Gupta (Indirecttax consultant-Big 4 Delhi)
I'ad gone through your reply. Firstly, thanks for inviting my attention towards amendment in Rule3, i'ad skipped it. Beg your pardon for that. I'ad given the opinion haphazardly.
Furhter, in respect of your point regarding sub agent service to agent may be out of the purview of Business Auxiliary service as per definition given in 65(19) of Finance Act,1994 as amended in which definition is exahustive and it requires direct relatioship between client and agent, I agree on this point.In present case subagency is established not direct relationship between abroad based unit and mumbai based agency established so it is out of the purview of business auxiliary service if Banglore based unit is pure agent otherwise it comes to client and agent relationship and service tax is levialble. Now, with regards to export of service, as service is not directly given to abroad unit in both the cases so it can't be considered as export of service. It also strengthen our grounds in both the cases.Having said that, scope of litigation from Authority can't be ruled out but ultimately this stands will prevail.
And so far as I know there is also a caselaw to support this aruguement.
And I don't think it is necessary to take consultancy of others in this matter.
Regards,
CABrijesh Upadhyay
B.Com.,LL.B. A.C.A.
Pursuing UPSC(Main)
It can't be considered as export of service as it is under 'c' category. Service should at least be performed outside india which is common condition for all the categories. In present case, it is very difficult to establish this fact so it can,t be considered as export of service.
Modified Opinion:
Hello Mr.Nikhil Gupta (Indirecttax consultant-Big 4 Delhi)
I'ad gone through your reply. Firstly, thanks for inviting my attention towards amendment in Rule3, i'ad skipped it. Beg your pardon for that. I'ad given the opinion haphazardly.
Furhter, in respect of your point regarding sub agent service to agent may be out of the purview of Business Auxiliary service as per definition given in 65(19) of Finance Act,1994 as amended in which definition is exahustive and it requires direct relatioship between client and agent, I agree on this point.In present case subagency is established not direct relationship between abroad based unit and mumbai based agency established so it is out of the purview of business auxiliary service if Banglore based unit is pure agent otherwise it comes to client and agent relationship and service tax is levialble. Now, with regards to export of service, as service is not directly given to abroad unit in both the cases so it can't be considered as export of service. It also strengthen our grounds in both the cases.Having said that, scope of litigation from Authority can't be ruled out but ultimately this stands will prevail.
And so far as I know there is also a caselaw to support this aruguement.
And I don't think it is necessary to take consultancy of others in this matter.
Regards,
CABrijesh Upadhyay
B.Com.,LL.B. A.C.A.
Pursuing UPSC(Main)
Hi Brijesh
For your information condition of performance outside India has been removed Via Finance Act 2007 by amending Rule 3(1)(iii) of Export of service Rules 2005.
However Service Tax is still applicable under the category of "Business Auxilliary Service" as commission agents are covered under that category.
Having said the above, Service Tax may not be applicable on services provided by sub agent to agent as chargeability arise only if services are provided to client (this is bit technical to understand) and agent in bangalore is not the client of Bombay based Agent in real sence.
But better u take opinion from ur consultant.
Regards
CA Nikhil Gupta
Indirect Tax Consultant-Big 4 (Delhi)
Service Tax is payable on commission under " Business Auxilliary Service"
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