Service Tax on Commission

[Guest]

I'm a freelancer Immigration Consultant and I get my Study Visa cases processed through one Immigration Company on profit sharing basis. The part of the commission that they receive from the College abroad is given to me. The company deducts TDS @ 10% and Service Tax @12.36% from my Commission, is this the right thing to do? Am I liable to pay Service Tax also as the commission is less than one lakh.

[YAGAY andSUN]

Dear Manoj,

As per the Place of Provision of Services Rules, read with Point of Taxation Rules, the recipient of the services, if in taxable territory, then, he liable to pay the Service Tax on taxable services which are provided by the service provider from the non taxable territory. The Service Recipient cannot avail the benefit of threshold limit which is currently freeze at ₹ 10,00,000/-.

Generally, service tax is not deducted by the service recipient as it is the liability of Service Recipient, over and above the remittance made to the counterpart. We suggest you please revisit your agreement/contract to verify that whether the service tax is deductible from your commission or not, then, take appropriate action in this regard.

Regards,

YAGAY and SUN

(Management and Indirect Tax Consultants)

[Akash Deep]

Dear Manoj,

Fact in this case are most important and i doubt that facts has been understood correctly. Before deciding the taxability, most important this is to determine the service provider service recipeint relationship. if there is no service provider-service recipient relationship Question of levy of service tax does not arise. To deterrmine the service provider -service recipient relationship two thing should be kept in mind. first is privily of contract and second is floe of consideration. person paying consideration against the provision of service is, generally, the service recipient. However consideration may also be paid by a person who has not privily to contract.Being so first thing to determine is the person among whom privity of contract exists and then to look for who or on whose behalf consideration is being paid. person who has the priviyt of contract with the service provider and pays the consideration or on whose behalf consideration is being paid by any other person pay the consideration. My understanding of the fact is that immigration company is paying you some amount from the commission received by them from collage abroad after deducting TDS and Service tax. It means that immigration company is paying you the consideration for the services provided by you to that immigration company.

The place of provision of services in your case shall be determined as per Rule 3 of the Place of provision of services rules, 2012. which will be the location of the service recipient. If that immigration company is located out side India place of provision shall be out side the taxable territory and no service tax shall be payable as charging section itself is not attracted to such transaction.

if the immigration company is located in india place of provision of service shall be determined as per Rule 8 of the Place of Provision of Service Rules, 2012, in this case also, place of provision of service shall be the location of service recipient only. As it is not a case of import of service and service provided by you is not specified under rule 2(1)(d) of the service tax Rules, 21994. liability to pay service tax shall be on the service provider only. As you are the Service provider here, you should collect the service tax from immigration company on the commision payable to you. it may also be noted that NO TDS is to be deducted on the service tax component.

you can discuss the issue further on 09873463912.

Regards

Akash deep

Deep and Associates

Advocates and Consultants

[Rakesh Chitkara]

Mr. Thakur,

This Immigration Company is following a practice advised by their consultant. Let us also listen to their point of view first. We can then form an informed opinion. I also agree with Mr. Akash Deep that No TDS is to be deducted on the service tax component. But are they actually deducting 22.36% ? That is an inconsistent stand because you can not be both a service receiver and provider in your dealings with this Company. I am sure they are being advised wrongly. Discuss with their CA and seek his advise as to how to correct this anomaly.

AI Summary

Service tax liability depends on place of provision and provider-recipient status; recipient cannot claim threshold relief. Liability for service tax on commission depends on identification of service provider and recipient and the place of provision of services. If the company is outside the taxable territory, no service tax arises; if inside, the place of provision is the recipient's location and privity of contract and flow of consideration determine whether the consultant or the company bears tax. The recipient cannot claim the turnover threshold, service tax should generally be collected by the provider from the recipient, and TDS must not be deducted on the service tax component.