EXPERT OPINION NEEDED
Mohan Joshi
(Querist) 20 July 2009
This query is : Resolved
i am a customer of one company and i had reffered some customers to the company by mouth publicity. company is paying me refferal incomee according to some formula
which has no relation to amount of prduct slae.They have point system and for every produc sale there are points and whereever there are 3 and 3 points at both wing we get 11500 rupees.for example copany send cheques this way.
Leftcustmer right custmer
group group rupees
3 3 11500
2 2 nil
3 300 11500
2 300 nil
3 1000 11500
2 800 nil
6 6 23500
1 400 nil
9 9 34500
9 2 nil
Can this income be termed as commission.if not what should be a proper word to descibe this type of income.
I am a customer of the cumpany and i recomended only 2 customers once in life time .then thes two brought 2 each in their turn.the process went on and today I have 2 direct and around 7000
indirct custmers in my chain can I be called commission agent here i make it clear that i am not involved in transactions of 7000 persons.
i need expert opinion as service tax department has asked us to register under service tax and pay service tax from 2004 to 2009 .
does such type of income comes under service tax.my first 2 refferences were in the year 2002 .
I joined gold quest by purchasing a single coin in liftime i e on 30/11/2001 and given two referrals one in dec 2001 and other in jan 2002 .this two persons were joined with my reference .my work ended on jan 2002 however i received income continusly .
2004-05 2,68,500
2005-06 1,26,500
2006-07 11,50,000
2007-08 20,70,000
2008 -09 2,53,000
here i may once again add that i have done nothing after jan 2001 i stoped ref persons, even then the chain went on and i got income without my effort continuosly
year by year.now i have receved suimmons from service tax and they are asking me to pay around a half million .
I stronly belive that As I have not rendered any service after 2001 i am not liable for tax as for as 2004 to 2009 is concerned. I am ready to pay tax for 2001 -2002
I need expert opinion on the subject
R.Ramachandran
(Expert) 31 October 2010
The activity of 'promotion or marketing or sale of goods produced or provided by or belonging to the client' falls under 'Business Auxiliary Service'. Since you have received income for the services provided by you by mouth publicity. the amount received from the company for such services, in whatever form would be regarded as service charges received by you and is therefore liable to service tax. The question is not whether you do such services now, the question is whether such in come relate to the services rendered by you. In the instant case, the answeris 'YES' and as such service tax is payable on the same.
R.Ramachandran
(Expert) 31 October 2010
On further review of the query, I would like to revise my above opinion. In fact it can be argued that there is no service receiver / service provider relationship between the two. The Company could neither sue you for not providing referral; nor compel you to provide such referals. As such there is no service intended between the parties. As such you are not providing any service and therefore not falling under the ambit of service tax.
