We are a commission agent assisting foreign companies in sale of goods to Indian customers. For our assistance, we receive a fixed percentage of commission from our foreign clients. Till date, we were advised that service tax is not applicable on our services as they were provided to clients located outside India. However, recently it has come to our knowledge that the service tax law has undergone some changes. Please confirm if there has been any change with respect to the applicability of service tax on commission agent services provided by us?
Service tax is levied on all services provided within India, except for specific exclusions. Whether, a particular service is provided within India is determined by Place of Provision of Services Rules, 2012 (POS Rules). Recently, vide Union Budget 2014, an amendment has been introduced in POS Rules, based on which services of an intermediary/commission agent facilitating supply of goods between two persons would be deemed to be provided at the location of the service provider (as per the definition of the term 'intermediary' amended under POS Rules). In other words, if the commission agent is based out of India, its services would be deemed to be provided in India and hence, would be taxable. Please note that the amendment is effective from October 1. It appears that services provided to you essentially involve facilitation of sale of goods by foreign clients to Indian customers. In such a case, services provided that you should attract service tax at 12.36%. Also, you should be eligible to avail of Cenvat credit of service tax paid on input services and offset against this output service tax liability.
Cenvat credit under reverse charge
We are a manufacturing entity making certain overseas payments. We have received an invoice dated for August 2014 on which we have deposited service tax under reverse charge within August itself. We have not made the payment to the vendor for the invoice amount. We wanted to take credit of such payment for the liability of August as we have a substantial liability to be paid. However, our consultant has informed us that we cannot take the credit in August as the payment to the vendor has not been made. Please advise if we are eligible to avail of credit of service tax deposited against the output tax liability for August 2014.
Rule 4(7) of the Cenvat Credit Rules, 2004 (the