The Hindu Business Line : Market research

We are a body of individuals undertaking research services to evaluate prospective customers for a client. Would we be liable to service tax? If yes, under which category of taxable services?

G. Ramesh

The answer is yes. Evaluation of prospective customers is a taxable service and would more appropriately fall under business auxiliary services. In Bangalore Commercial Corporation vs CCE, Bangalore (2006 4 STJ 451 CCE (A), Chennai), it was held that the expression `market research agency' means any commercial concern engaged in market research in any manner in relation to any product, service or utility, including all types of customised and syndicated search services.

The words `evaluation of prospective customer' should be read and understood in its context. It exists in billing, collection or recovery of cheques, accounts and remittance, all of which are capable of being evaluated in monetary terms. Hence, expression `evaluation of prospective customer' is not akin to `market research' which is essentially a qualitative, rather than quantitative, process. The service of conducting all-India surveys for some products is nothing but market research for the client and cannot fall within the ambit of the expression `evaluation of prospective customer' occurring in the definition of business auxiliary services.

Input service distributor

Our company has its head office in Delhi and a factory near Ahmedabad. Do we need to register the company under the category of input service distributor?

Satish R

Assuming that the company is a manufacturer of excisable goods and not an output service provider, it may continue to have one registration only; there may be no need to register as input service distribution. In fact, input-service distributor is an intermediary or an office which manages the business of manufacturer/producer of final products or output service provider and undertakes to perform the following:

a) receive invoices issued under service tax rules toward purchase of input services.

b) issues invoice/bill/challan for distributing the credit of service tax paid on such services to manufacturer/producer or service-provider.

As the entire credit is to borne by only one unit, registration of input service distributor may not be required.

However, in the case of certain inputs/input services, which are exclusively consumed at the registered office and not in the manufacturing of output goods, Cenvat credit may not be available.

The querist needs to assess the need for such registration based on functions carried out at registered office and the likely need for distribution of credit. However, it may be noted that registration of input service distributor is mandatory under the Service Tax (Registration of Specified Category of Persons) Rules, 2005.

Send in your queries to MentorAtYourService@gmail.com

http://MentorQA.blogspot.com

Sanjiv Agarwal

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