Service Tax - clarification regarding 'Commission' covered under 'Business Auxiliary Service' - reg. - Service Tax - Dy.No.324/Comm (Service Tax)/2008

Dy.No.324/Comm (Service Tax)/2008 GOVERNMENT OF INDIA MINISTRY OF FINANCE DEPARTMENT OF REVENUE CENTRAL BOARD OF EXCISE CUSTOMS NEW DELHI Dated : December 1, 2008 Subject : Service Tax - clarification regarding 'Commission' covered under 'Business Auxiliary Service' - reg. Please refer to your letters V(ST)/15-96/Commissioner/BIL/2008/Adj dated 10.10.2008 and others on the subject mentioned above. 2. The matter regarding levy of service tax under the head 'Business Auxiliary Service' on the 'Commission' received by the Directors of the company has been examined. The Board is of the view that some companies make payment to their officials, such as Managing Directors/Directors, terming the same as 'Commissions'. This payment may be over and above the salary and other remunerations. Such commissions may be either performance linked or linked to the financial results of the company, but the fact is that it is nothing but remuneration paid to an employee by the employer. The relationship between an employee and the employer is distinct from the relationship between a service receiver and service provider. Thus action taken by an employee for the benefit of the employer cannot be in the nature of service. Therefore, so long as the activities performed are duties within the framework of the terms of employment, the amount paid by an employer to an employee, even if it is termed as commission, would not be treated as 'commission' mentioned under the definition of business auxiliary service and service tax would not be leviable on such amount. 3. In view of the above clarification, pending issues may be resolved in line with the above. GAUTAM BHATTACHARYA Commissioner (ST)