Commission paid in foreign country - service tax liability

[Guest]

Whether service tax is payable ( as Service receiver) on Commission payment abroad to overseas agent for procuring service orders in his country, say U.K. ( covered under Export of Services)??

[Madhukar N Hiregange]

In my opinion the same is liable from 19.4.2006 after the rules were put in place and Sec. 66A was inserted in the law books. Prior to that the insertion of explanation to Sec 65 (105) could be said to be illegal as an explanation cannot bring about a levy. However this requries a judicial confirmation. This is an import of servcie and not an export of service. therefore the export of services rules do not apply.

AI Summary

Import of service: cross-border commission to overseas agents attracts service tax where statutory amendments render such transactions taxable. Commission paid abroad to overseas agents for procuring service orders is characterized as an import of service and, following introduction of specific rules and an amendment to the charging provision, is liable to service tax; the export of services framework does not apply, and the earlier explanatory insertion into the service definition may not alone validly create a levy and remains subject to judicial scrutiny.