Bad news for all Export Commissions / indenting agents in India ?

There are many who provide services of this nature wherein the ultimate recipient of the services resides outside India. This typically happens in the case of the foreign suppliers who were trading their good in the Indian territory and paying the commission to the Indian agents for the promoting their material to the Indian buyers. This notification has now changed the pointer to the provider for services instead of the recipient of the services for this purpose. This makes all indenting agents of this nature (which were previously outside the preview) liable to pay service tax w.e.f. 1st Oct 2014.

Changes in Place of Provision of Services Rules, 2012 (“The POP Rules”) Vide NotificationNo. 14/2014-ST Dated 11-7-2014 (Effective From 1-10-2014):-

Definition of ‘Intermediary’ has been amended to include intermediary of goods in its scope. Accordingly, an intermediary of goods, such as a commission agent or consignment agent shall be covered under Rule 9(c) of the POP Rules instead of Rule 3 of the POP Rules.

Let us analyse above.

Rule 9(c ) of Place of Provision of Service

Rule 9 : Place of provision in respect o following services shall be the location of the service provider:

(C ) Intermediary Services;

INTERMEDIARY SERVICES

Let us analyse Intermediary Service Pre and Post 01.10.2014.

“Intermediary” means a broker, an agent or any other person, by whatever name called, who arranges or facilitates a provision of service between two or more persons, but does not include a person who provides the main service on his account.”

WEF 01.10.2014 Intermediary Means as under.

“Intermediary” means a broker, an agent or any other person, by whatever name called, who arranges or facilitates a provision of service or a supply of goods between two or more persons, but does not include a person who provides the main service or supplies the goods on his account.”

Please mark words written in bold. It is evident that the service of intermediary facilitating supply of goods also be considered intermediary service wef 01.10.2014. Hence Location of service provider will be the place of provision of service.