Applicability of Service tax - under which category

[Guest]

one of our client is the agent of one MNC and he is getting commission from him in foreign currency towards the procuring order , submitting tender on his behalf and making liasoning on his behalf with some PSU and indian companies. is service tax applicable? if yes ,under which category mohan

[Ravi Chopra]

Yes, your client is liable to pay service tax on the commission received for procurement of orders (it marketing) etc. under business auxiliary services. Since all the services is being provided in India, no exemption for receipt in foreign exchange

[rishi mohan]

The liability of service tax arise if services are rendered in India. In the above case the applicability of service tax takes place on the commission received.

[KASTURI SETHI]

Since enjoyment of service is in India, service tax is applicable. Two relevant circulars are appended below:-

Export of Services Rules, 2005 - Applicability clarified

Circular No. 111/5/2009-S.T., dated 24-2-2009

F.No. 137/307/2007-CX.4(Pt.)

Government of India

Ministry of Finance (Department of Revenue)

Central Board of Excise & Customs, New Delhi

Subject : Applicability of the provisions of the Export of Services Rules, 2005 in certain situations.

Export of services - Clarification of phrase “used outside India”

Circular No. 141/10/2011-TRU, dated 13-5-2011

F.No. 280/26/2011-CX8A(Pt.)

Government of India

Ministry of Finance (Department of Revenue)

Central Board of Excise & Customs, New Delhi

Subject : Applicability of the provisions of the Export of Services Rules, 2005 in certain situations.

 

[KASTURI SETHI]

Erstwhile BAS category (Now under Other Than Negative List)

AI Summary

Service tax applies to commissions received in foreign currency for business auxiliary services rendered in India, per Export of Services Rules, 2005. A client, acting as an agent for a multinational corporation, receives commission in foreign currency for activities like procuring orders and liaising with public sector undertakings and Indian companies. The query concerns the applicability of service tax on these commissions. Respondents agree that service tax is applicable under the category of business auxiliary services since the services are rendered in India, regardless of the foreign currency receipt. Relevant circulars and rules, such as the Export of Services Rules, 2005, are cited to clarify that the enjoyment of services within India mandates the tax liability.