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Cenvat credit on foreign commission

Service Tax - Started By: - saket s - Dated:- 18-2-2016 Last Replied Date:- 28-2-2016 - We are paying service tax on foreign commission because it is an intermediary services and not taking input service tax credit, I understand vide Notification NO. 02/2016-CE (NT), DT. 03/02/2016 cenvat credit can be taken on such commission. Please clarify. Thanks - Reply By Rajagopalan Ranganathan - The Reply = Sir, According to rule 9 (c ) of Place of Provision of Service Rules, 2012 the place of provision .....

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ision of service by the foreign agent is located outside the taxable territory you need not pay any service tax on such commission. If you have paid you can seek the refund of service tax paid subject to Doctrine of Unjust Enrichment. That is, if you have passed on the tax to your client then you cannot claim the refund. Since no service tax is payable on commission paid to foreign service provider you are not eligible to avail the credit of service tax paid by you. If you avail the Department w .....

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of BAS and now under the category of Other Than Negative ) to a foreign based company while being located in India. Service provider is located in India. As per Rule 9(c) provision of location is in India.Enjoyment of service is in India.You should be eligible for input service credit if you are getting commission on account sales of dutiable goods. - Reply By Rajagopalan Ranganathan - The Reply = Sir,To take credit of service tax paid on input service you should be a service receiver. If the s .....

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reign principals for marketing their products in India and solicit orders from users of these in India. The Company receives commission which is a percentage based on the quantum of sales orders booked from customer in India. The commission is paid by the principals situated outside India in convertible foreign exchange. After introduction of Notification No.14/2014-Service Tax dated 11-07-14 w.ef. 01-10-2014 the above commission which was not taxable has become taxable as per amended definition .....

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rvice provided. Thanks. - Reply By CS SANJAY MALHOTRA - The Reply = Dear Friends,Very interesting issue, with minor change in POP, issue has become debatable. Prior to change in POP, agents in India earning commission from overseas sellers were considering same as Export of service and service tax was exempt.In case of Commission paid from India to overseas agents, service recipient were paying service tax in capacity of deemed service provider. Accordingly they were eligible for service tax CEN .....

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treated as Export of Service, which makes person eligible for refund???AS per POP, for commission received in India, service is treated as provided in India thus Export can't be treated...I think the issue is debatable and might end into litigations. The above are my thoughts and others seniors might have divergent views. - Reply By saket s - The Reply = So, even under Notification NO. 02/2016-CE (NT), DT. 03/02/2016, this scenario is not getting covered? - Reply By KASTURI SETHI - The Reply .....

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nd at the same time. Still I am tilted towards eligibility. Whether this scenario is getting covered or not in this notification ? Nothing can be said in a hurry. However, this notification is not in isolation. - Reply By saket s - The Reply = My thanks all the experts who have contributed to this post. Any further input is most welcomed.Saket S - Reply By Rajagopalan Ranganathan - The Reply = Sir From your initial query dated 18.5.2016 I understood that you are paying commission to an intermedi .....

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ntage based on the quantum of sales orders booked from customer in India. The commission is paid by the principals situated outside India in convertible foreign exchange. Rule 6A of Service tax Rules, 1994 states that - Export of services.- RULE 6A. (1) The provision of any service provided or agreed to be provided shall be treated as export of service when,- (a) the provider of service is located in the taxable territory , (b) the recipient of service is located outside India, (c) the service i .....

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territory (foreign country) and the service receiver is located in taxable territory ( India, excluding State of Jammu & Kashmir). In case the service provider is located in taxable territory ( India, excluding State of Jammu & Kashmir) and service receiver is located in non-taxable territory (foreign country) then tha activity will be treated as export of service. Notification No.02/2016-Central Excise (N.T.) dated 3.2.2016 inserts an explanation in rule 2 (l) of Cenvat Credit Rules, 2 .....

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15 (Guj.) = 2014 (8) TMI 713 - GUJARAT HIGH COURT In the above cases it was held that service of commission agent is not input service. By inserting the explanation as mentioned above sales commission agent service is included in sales promotion and service tax paid on sales commission is eligible for cenvat credit. I hope the above views will clarify your doubts in this matter. - Reply By CS SANJAY MALHOTRA - The Reply = Dear Mr. Rajagopalan ji,Place of Provision in case of Intermediary service .....

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ed vide Circular No. 141/10/2011-TRU, dated 13-5-2011 (para 3 and 4) read with Export Rules are relevant. (iii) Category III [Rule 3(1)(iii)] : For the remaining services (that would not fall under category I or II), which would generally include knowledge or technique based services, which are not linked to an identifiable immovable property or whose location of performance cannot be readily identifiable (such as, Banking and Other Financial services, Business Auxiliary services and Telecom ser .....

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ASTURI SETHI - The Reply = SH.CS SANJAY MALHOTRA JI, Sir, Has that stage come to say, We agree to disagree. ? - Reply By CS SANJAY MALHOTRA - The Reply = Respected Sir Sh. Kasturi ji, Appreciate the words highlighted by you Enjoyment of Service which is in India in the present case as per Rule 9 of POP. The same calls for non admissibility of CENVAT Credit on Service Tax. - Reply By saket s - The Reply = Thank you all.The import of this discussion is, if we decide to take such cenvat credit, we .....

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4. RCM is not applicable ?? You fulfill the following conditions :- 1. Foreign exchange is earned by you. Nobody can challenge. 2. Enjoyment of service/performance is partly in a foreign country. (Had you not procured the orders for export, India would not have earned foreign exchange.So Practically performance is fully outside India. 3. Practically Service receiver is outside India Ultimate goal of export is earning foreign exchange for India which is being achieved by you. In my view if you f .....

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, he can pass on the service tax burden to the service receiver. ST is an indirect tax and can always be collected from the receiver of the service. The SR who purchases/imports such goods and uses the same in the manufacture of his dutiable goods or for provision of his output service is rightly eligible to take the credit since it becomes input service for him. The amendment vide Nofn.2/2016-CE(NT) being referred in the question is to permit cenvat credit of sales commission to a service recei .....

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