Tds and service tax liability on commission paid

[ramesh bohra]

we are exporter and we have one agent who is booking order for us on commiission basis he is in dubai now we want to pay him commission .kindly inform us service tax and tds is liable on above commission and how we can take rebate

[Surender Gupta]

As per the scheme of Service Tax, it appears that commission paid to agent situated at Dubai would be considered as Import of Service and would be liable to service tax. Further, Since you are remitting the payment which is taxable as per the provisions of Income Tax, you need to deduct TDS.

[Vijay Chitte]

I agreed with Mr. Surender Gupta that query sited by you fall under Import of serivce and liable to serivce tax in India, But as per Income tax CIRCULAR NO.786 DT.07/02/2000, commission paid to foreign commission agent, No TDS will be deductable. Please reffer this circular

[RAKESH R]

I agree with the view expressed by Mr. Surender Gupta that you are liable to pay service tax as a recipient of service (import of service). You have not mentioned the type of export. i.e. whether export of goods or services?. If it is export of goods, then service tax is exempted under Notification 41/2007 ST dated 6.10.2007 subject to the conditions stipulated. You have to pay service tax first and then claim refund of the same as per the above Notification. If the export is in the nature of service, you are eligible for rebate of service tax which is paid on the import of services in terms of rule 5 of Export of Serices Rules 2005 read with Notification 12/2005 ST dated 19.4.2005. In both the cases, first you have to pay the service tax on the commission amount paid to your foreign agent and then file your application for refund. Regards S. Gokarnesan Advocate, Chennai

I agree with Mr. Vijay Chitte, import service is exemted for the perpose of export of goods, so that first you have to pay service tax on commission paid to the agent situated at out side of India, then file claim of refund under Notifn. No. 41/2007 dt. 06.10.07 as ammeded vide Notifn. No. 17/2008 dt. 01.04.08 inserted at Sr. No. 15, service falling under section 65(105)(zzb), but the Notifn. No. 17/2008 dt. 01.04.08 come into force from the date of its publication in the Official Gazette i.e. 01.04.08, so you can claim only on the commission paid after 31.03.08. Regards Pavitra Kothari, Indore

AI Summary

Import of services liability: commission to foreign agent attracts service tax, payable first then claimable under export refund rules.
Commission to a foreign agent is treated as import of services and attracts service tax; the exporter should discharge service tax at payment and then claim refund or rebate under the export-related notification or the Export of Services Rules, depending on whether the export is goods or services. On TDS, advisory opinions conflict: one view requires deduction of TDS on the taxable commission payment, while a referenced income-tax circular indicates no TDS is deductible on commission paid to a foreign commission agent.