Applicability of Service tax - under which category

[Asked by 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 on commission income applies when intermediary services are provided and enjoyed within India, despite foreign currency receipts.
Service tax applies to commissions for procuring orders, submitting tenders and liaising where the services are provided and enjoyed in India; these activities fall under business auxiliary services and are taxable despite receipts in foreign currency. Export of services exemptions apply only when the service is used or enjoyed outside India; mere receipt in foreign exchange does not establish export treatment.