Service tax on credit note

[Guest]

We paid commission to the party which credit note is raised to the party who is given us a order. What is the effect in excise/service tax ? Who will be pay the service tax?

[Guest]

From your query, it is presumed that commission is paid to the party itself who has given the order for supply of goods/services to him. In such a case, the amount cannot be considered as 'commission' as one cannot render service to himself. It is more of discount/subvention which is passed in the form of commission. To avoid complications, the amount itself may be termed as discount/subvention in which case no excise/service tax is attractable.

AI Summary

Commission paid to ordering party treated as discount/subvention, and thus not subject to excise or service tax. Whether a payment described as commission made to the party that placed the order raises excise or service-tax liability. The response explains that a party cannot render a taxable service to itself and such payments are more appropriately treated as discount/subvention passed to the purchaser; when so characterised, the amount does not attract excise or service tax.