Service tax applicability on commission paid by foreign company

[Guest]

A Pvt company registered in India receives commission from foreign principals for orders executed in India. The other facts are: a.The foreign principal does not have any office in India. b. the indian company has no authority to sign any agreemnt with the customer on behalf of the foreingn principal. c. service is delivered outside india as the principal is situated outside india. d. money is received from aborad in foreign exchange. i want to know whether service tax is to be paid by the indian company on the commission received from abroad e.

[Surender Gupta]

In the query all the conditions of Export of Services are being satisfied except that the service must be "used" outside India. If the order was executed in India for which A pvt. company is taking commission, there is all the possibility that services are being used in India. However, it is the matter of facts and circumstances. You should carefully analysis the relevant documents again to find and frame the view about the usage of the services. If you find that the services are also being used outside India, you are entitled to avail the exemption.

[Guest]

Yes, service tax is applicable. Because the law is said that the company have office in India. In the case the company has been registered in India as per companies act. Hence this thing have no value that whether the contracts are made by office established in india or not.

AI Summary

Export of services exemption: commission income exempt if services are used outside India, otherwise taxable. An Indian company's commission from foreign principals may qualify for the Export of Services exemption only if the services are in fact used outside India; entitlement is a factual determination. If use outside India cannot be established, receipts are likely taxable despite foreign payment or absence of the principal's local office.