Business Daily from THE HINDU group of publications
Monday, Aug 07, 2006
Business Daily from THE HINDU group of publications Monday, Aug 07, 2006 |
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Mentor
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Taxation Industry & Economy - Taxation Columns - At Your Service Taxability of commission income
I am a one-man company receiving commission from overseas companies as their market finder for their products through normal banking channels. I do not raise bills/invoices. Am I liable to pay service tax? If yes, from when does my liability start and how much penalty will I have to pay for delayed payments? L. J. Eswar The services rendered by commission agents are taxable under business auxiliary services (Section 65(19) of Finance Act, 1994). Commission agent has been redefined by the Finance Act, 2005. Accordingly, "commission agent" means any person who acts on behalf of another person and causes sale or purchase of goods, or provision or receipt of services, for a consideration, and includes any person who, while acting on behalf of another person: i) deals with goods, services or documents of title to such goods or services; ii) collects payment of sale price of such goods/services; iii) guarantees collection or payment for such goods/services; or iv) undertakes any activities relating to such sale of purchase of such goods/services. According to the new definition, commission agent should cause sale or purchase of goods or provision of services for a consideration and should act on behalf of another person. The definition of commission agent covers all types of commission agencies (whether for goods or services) barring sale or purchase of agricultural produce. Since commission agent can be any person, even an individual would be considered as a service provider. In absence of facts to ascertain whether your services could be deemed as export of services, the services provided for marketing of products in India for an overseas company would be a taxable service. Such services are taxable w.e.f. July 1, 2003, though there prevailed an exemption Notification No. 13/2003 dated June 20, 2003, which granted exemption to commission received for causing sale or purchase of goods. With effect from July 8, 2004, such exemption is available only in respect of agricultural produce. There will be tax liability whether you raise bills/invoices or not. In case you do not raise bills within 14 days of rendering the service or receipt of payment (commission), whichever is earlier, you are violating rule 4A of Service Tax Rules, 1994. Any contravention shall be liable to attract penal provisions under Section 77, whereby penalty up to Rs 1,000 may be levied.
Send in your queries to MentorAtYourService@gmail.com
Sanjiv Agarwal
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