Act, 1998 enables State Governments to organize, conduct or promote lotteries. Lottery tickets are printed by the State governments and are sold through agents or distributors. Tickets are delivered by the State Government to the distributors at a discounted price as compared to the face value of the tickets. Thus, the procurements of input, capital goods or input services as defined in the CENVAT Credit Rules, by any person for a client i.
Commission agent: As per the definition of Business Auxiliary services, services as commission agent are considered Business Auxiliary services. As regards the question whether Insurance agents, Clearing and Forwarding agents working on commission basis fall under the definition of business auxiliary service, it is clarified that they do not, as they are specifically covered within the definition of other specified taxable services, namely the Insurance service and Clearing and Forwarding Service respectively. It is not possible to give an exhaustive list of business auxiliary services, the following are illustrations of services that are covered under this category viz. The activity of production or processing of goods for, or on behalf of, the client either amounts to manufacture or it amounts to Job work.
This exclusion is given to avoid double taxation on same product. Manufacture attracts levy of Excise duty, thus the production or process which does amount to manufacture is excluded from levy of Service Tax. Third Schedule, involves packing or repacking of such goods in a unit container or labeling or re-labeling of containers including the declaration or alteration of retail sale price on it or adoption of any other treatment on the goods to render the product marketable to the consumer. The definition of Job Worker is given in CENVAT Credit Rules 2004.
Business Auxiliary Service’ if such production activity does not amount to manufacture. So, if process amounts to manufacture the duty of Excise will be levied and if it does not amount to manufacture the Service Tax can be levied. 2005-ST dated 01-03-2005 exempts the taxable service of production or processing of goods for, or on behalf of, the client, from Service Tax. Nil’ rate of duty or duty of excise wholly exempt. Small service providers whose aggregate value of taxable services rendered in the previous year has not exceeded the limit of Rs. Services provided for official or personal use of foreign diplomatic missions and family members of diplomatic missions.
Business Auxiliary Service is provided in relation to production or processing of parts and accessories used in the manufacture of cycles, cycle rickshaws and hand-operated sewing machines, for, or on behalf of, the client subject to the condition that gross amount charged from the client is inclusive of the cost of inputs and input services, whether or not supplied by the client. Taxable service provided by a person, having his place of business, fixed establishment, permanent address or usual place of residence, in a country other than India, and which is received by a hotel located in India, in relation to booking of an accommodation in the said hotel, for a customer, who has his place of business, fixed establishment, permanent address or usual place of residence, in a country other than India, is exempt from the whole of the Service Tax. Central Excise Act, 1944 would not be liable to Service Tax. As production of goods on behalf of the client is leviable to Service Tax under ‘Business Auxiliary Service’ only if such production activity does not amount to manufacture.
ISSUE 1: Whether commission received by distributors for distribution of mutual fund units is liable to Service Tax under Business Auxiliary Service? ANSWER 1: Distributors receive commission from mutual fund for providing services relating to purchase and sale of Mutual fund units. Services provided by such distributors are in the nature of commission agent and are, thus, liable to Service Tax under Business Auxiliary Service . Such services are liable to Service Tax under Business Auxiliary Service .