Commission received in USD - ST payable?

[NANDKUMAR SAGWEKAR]

Dear All learned colleagues,

My client based at Mumbai is providing services in the nature of sourcing of material to the Company manufacturing engineering parts at  Baroda - Gujrat. This baroda based company is a branch of a  Company based at Hongkong.

Client received the work order from Hongkong for sourcing of materials for Indian based branch at baroda , client issues

bills in USD to Hongkong based company and also received the commission of USD 10000 from Hongkong . The sourcing of materials and issue of invoice and receipts of payments takes place during the period of 08-August-2012 to 25-Sept-2012. Whether this is taxable from service tax point of view. I expect the views of learned colleagues .

Thanks

ANAND SHEMBEKAR

CELL 91-9421187122

 

[CASeetharaman KC]

Here the place of provision of services rules 2012 is in the taxable territory as both the service receiver and the service provider are situated in the Taxable territory as per Rule 8 of the place of provision of services rules. Hence the activity is taxable and as far as the transaction with the foregn company is concerned it would ulimately pass on the cost of sourcing such materials to its Indian branch which is but an accounting entry.The crux of the issue is that the service is being provided in the taxable teritory and is thus taxable, hence commission received would be subject to service tax.

[NANDKUMAR SAGWEKAR]

Thank you very much CA Mr. Seetharaman K C for your valuable advice .

 

Thanks

ANAND SHEMBEKAR

CELL 9421187122

AI Summary

Place of provision rules: commission for sourcing is taxable when provider and receiver are in the taxable territory. Application of the Place of Provision of Services Rules determines that where both the service provider and service receiver are located in the taxable territory, sourcing services and related commission are treated as provided within the taxable territory; cross-border invoicing in foreign currency and subsequent cost allocation to an Indian branch do not change the territorial character of the service, so the commission is subject to service tax.