Service tax or VAT

[Asked by Guest]

Hi Team,

We have started a new business wherein we procure second hand clothes from people and sell it. Below are the steps involved in a transaction to give you a brief idea about our model:

1. Potential seller to give us the basic details of the garment like the Original price of the garment, condition of the garment, brand and pictures of the garment
2. If the garment is in fashion and in a good condition, we send a confirmation to the seller along with a suggested selling price.
3. Post approval from the seller, the seller couriers us the garments and the garment is collected on approval basis
4. After receiving, the garment is thoroughly quality checked, dry cleaned and photos are clicked and uploaded to the website
5. Once the garment is sold, the amount is transferred to the seller post deducting our commission

We do not have ownership of the garment at any stage. Would we be taxed for VAT or Service tax and how much? We have registered ourselves as a partnership firm and are starting a website soon.

Thank you in anticipation!!

AI Summary

Intermediary service: commission from facilitating second hand garment sales is taxable where provider is in taxable territory.
Where an operator procures and lists second hand garments without ever acquiring ownership and is remunerated by retaining a commission, the activity is an intermediary service. Under the Place of Provision Rules the service is provided at the service provider's location and, if that location is within the taxable territory, the service is taxable. The activity is not trading in goods and the exemption relied upon does not apply; service tax is payable on the commission and may be recovered from the garment owner.