Service tax on commission received for export of goods

[JAGANATHAN KUMARAVEL]

A Company receives order for export of goods, the company in turn places back to back order with the manufacturer in India. On export of goods the Company has given standing instruction to their banker, to transfer 90% to the exporter of goods and transfer 10% only to its account as commission income. In the books the 10% amount is only considered as foreign commission income received .

Request clarification whether service tax is liable on the commission income received on export of goods. (Commission income received on import of goods is taxable under service tax now)

T.K. Jaganathan

[Rajagopalan Ranganathan]

Sir,

1) If the company which procures order for export goods purchases the goods from the manufacturer then he will be known as merchant exporter. Merchant exporter will issue all documents, namely, export invoice, shipping bill, bill of lading etc. 2) If the company simply procures order from the foreign buyer and give directions to a manufacturer to export the machinery on his behalf then the manufacturer has to file all the documents mentioned above. In this case the manufacturer will be the exporter. From your narration i think your case falls under second category. If it is so then the company whcih procures the order fromn foreign buyer has to pay service tax on the commission earned by him since he is located in the taxable territory.

AI Summary

Service tax on export commissions applies when a domestic intermediary procures orders but does not issue export documents. Service tax liability for commission on exports depends on whether the domestic company acts as a merchant exporter (purchases goods and issues export documents) or as an intermediary procuring orders while the manufacturer exports. If the manufacturer issues the export documents and is the exporter, the procuring company's commission income is treated as intermediary services provided from the taxable territory and is subject to service tax.