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Service Tax On Commission Received From Abroad For Sale of Goods in
Service Tax On Commission Received From Abroad For Sale of Goods in
Rule 9. Place of provision of specified services.- The place of provision of following services
shall be the location of the service provider (c) Intermediary services.
COMMENTS:
The POT Rule 7 (a) and (b) are amended w.e.f. 01/10/2014 along their respective provisions i.e.
(First and Second Proviso to Rule 7, as it existed on or before 01/10/2014). Further, Rule 10 is
newly added. However, as clearly worded Rule 10, Notwithstanding anything contained in the
first provisoto rule 7, it is clear that Rule 10 and first proviso to Rule 7 (a) are applicable to
Export of Services.
As the place of provision of service is in India, the agents services are not export of services
and hence, Rule 7(a) and or Rule 10 are not applicable.
Unlike Rule 10 introduced which overrides Proviso to Rule 7 (a), no other rule is introduced to
override Rule 7 (b) and second proviso.
Therefore, the agent shall decide their case as per Rule 7(b) read with second proviso, as
amended, which is worded as where the payment is not made within a period of six months of the
date of invoice, the point of taxation shall be determined as if this rule does not exist. Therefore,
the point of taxation is to be decided as per Rule 3 (as Rule 4 and Rule 8 are rules that apply to
specific situations and not to our client.) i.e. earlier of INVOICE DATE OR ADVANCE OR
PAYMENT RECEIVED.
Noting above points and also noting that definition of intermediary is amended w.e.f. 01/10/2014
only to include intermediaries who arranges or facilitates sale of goods but does not include a
person who provides the main service on his account, the Indian commission agents selling
goods of foreign parties are not intermediaries and Rule 9 being a specific rule, overrides other
rules and further, as the economic activities took place in India i.e. Both sale of goods and
receipt of commission. Receipt of income in foreign currency is no more a stipulation now for a
cross-boarder service to become taxable.
However, the Rule 9 applies w.e.f. 01/10/2014 and not before, in other words, services provided
on or before 01/10/2014 by such Indian intermediaries selling goods of foreign parties where not
subject to Rule 9 of POP and hence, services provided by them on or before 01/10/2014 were not
taxed, as being performance based services their POP was not India (noting that a commission
agent provides services to his Principal, as also clarified by the Guidance Note).
Interpretation that old collections realized after 01/10/2014 becomes taxable can not be
sustained, as it will be against the very purpose of introduction of the amendment notification 13
and 14 of 2014.
CA SANJAY JOSHI