Query on taxation

[Laijesh Gopi]

Hi,

I am from Kerala and I have a concern. The situation is like I am purchasing a web service and reselling it to my clients; still, the service provider would be the creator of the web service (I am just a link between the client and the service provider).

The business is in such a way that I am getting the service for Rs. 250 per person (login) including service tax. I am planning to sell it for Rs. 250. Will I have to include Service Charge in the bill to my clients? If so, how much?

[Rajesh Nathoo]

Dear Mr. Laijesh ,

You are acting as an intermediary between main service provider and client . The amount of Service tax u have to pay depends on your status as a pure agent or not .

 To qualify as a pure agent under Service tax laws certain basic conditions are to be satisfied e.g.

1.  The Service Receipient should not  u are acting as an agent and who is the main service provider .

2. U should not have any control on price to be charged from service receipient . i.e. Service Receipient should clearly know how much are ur service charges  and how much main service provider has charged u for the particular service .

3. There should be valid agreements between u and service providers and u and service receipients which should reflect u are acting as an agent in the whole process.  etc.

In case u satisfy the above conditions , u are liable to pay ST on only Service Charges as main amount charged by service provider would be reimbursable in nature . i.e.

In case u do not satisfy the above conditions , u are liable to pay ST on Rs 250. However u can take cenvat credit of ST charged by the Service Provider .

AI Summary

Pure agent status determines service tax liability: qualifying intermediaries taxed only on their markup, otherwise on full receipt. Tax liability for a reseller intermediary turns on pure agent status: if qualifying as a pure agent - evidenced by transparency to the service recipient, lack of price control, and agency agreements - amounts paid to the main provider are reimbursable and only the intermediary's service charge is taxable. If not qualifying, the intermediary's entire receipt is taxable, although cenvat credit may be available for service tax charged by the main provider.