Category - Commission paid outside India

[Guest]

This query is in responce to the reply given to Mr.Chander Prakash for his query dated 31st March: Commission services is covered under Business Auxiliary Services, which is covered in  Section 65 (105)(zzb) of the Act. But, as per draft of Taxation of Services (provided from Outside India and received in india) Rule 2006,the said Clause (zzb) is not covered. Therefore, pl. explain as to how the commission paid outside India shall be treated as taxable service within the preview of service tax

[Surender Gupta]

All the services provided outside India and received in India are covered in the Draft Rules. all the services which are not covered in rule 3(2)(i) and 3(2)(ii) are covered in Rule 3(2)(iii) and provisions may be applied accordingly.

[Guest]

Reply given by Mr. Surender Gupta refers to rule 3(2)(iii)of the draft rules regarding its applicability to commission payment outside India. But, the said rule specificaly applies in those cases where receipient is located in India. Therefore, should we presume that any export commission, given to foreign national or NRI residing outside India, are not covered in Service Tax?

[Surender Gupta]

Yes, such services should not be taxable in India if the receipient is not located in India.

AI Summary

Taxability of cross-border commission depends on recipient location; commissions to persons outside India are not taxable. Commission services fall under Business Auxiliary Services for service tax purposes, but the draft Taxation of Services Rules apply extraterritorially only when the recipient is located in India; therefore commissions paid to persons located outside India are not taxable under the draft rules, while commissions paid to recipients located in India may be taxed.