Latest Expert Exchange Queries
sitemapHome | Registration | Job Portal for CA's | Expert Exchange | Currency Converter | Post Matrimonial Ads | Post Property Ads
News shortcuts: From the Courts | News Headlines | VAT (Value Added Tax) | Service Tax | Sales Tax | Placements & Empanelment | Various Acts & Rules | Latest Circulars | New Forms | Forex | Auditing | Direct Tax | Customs and Excise | ICAI | Corporate Law | Markets | Students | General | Indirect Tax | Mergers and Acquisitions | Continuing Prof. Edu. | Budget Extravaganza | Transfer Pricing
Popular Search: TDS :: due date for vat payment :: TAX RATES - GOODS TAXABLE @ 4% :: VAT Audit :: VAT RATES :: empanelment :: ACCOUNTING STANDARDS :: ICAI offer Get Windows 7,Office 2010 in Rs.799 Taxes :: Central Excise rule to resale the machines to a new company :: cpt :: list of goods taxed at 4% :: ARTICLES ON INPUT TAX CREDIT IN VAT :: form 3cd :: articles on VAT and GST in India :: ACCOUNTING STANDARD
« News Headlines »
 Draft Rules for prescribing the method of valuation of fair market value in respect of the trust or the institution-Chapter XII-EB of the Income-tax Act, 1961- reg.
 India is moving towards a flawed GST
 ICAI to organise two-day international conference in Hyderabad
 Here's how to calculate tax payable on your capital gains
 Income Tax calculations for the financial year 2016-17
 CPE Events 17 October - 22 October 2016
 High Court raps I-T Department for wrong tax demand
  CBDT signs 5 advance pricing pacts with Indian taxpayers
 Finance ministry warns tax officials of action against GST protest
 Big changes for small units under GST
 Parliament’s winter session to begin on November 16 to expedite GST rollout

Direct selling agents to pay service tax on gross value
November, 15th 2006

The tax department is leaving no stone unturned on the service tax front. The Directorate-General of Central Excise Intelligence (DGCEI) has slapped show-cause notices on direct selling agents (DSAs) for auto and home loans, saying they should pay service tax on the gross value of their commission.

DSAs, which source and process loan applications on behalf of banks, receive gross commission after various deductions such as subventions to the customer (borne by the DSAs), penalties and income tax deducted at source. Faced with fierce competition, DSAs often offer incentives (subventions) to lure customers. They, however, used to pay tax on the actual commission they receive the gross amount minus deductions such as the commission foregone according to official sources,

the DGCEI has emphasised in a clutch of notices issued recently to a cross-section of DSAs that the service they provide is taxable at gross value. Promotion and marketing of any good or service is taxable under the head of business auxiliary services.

Analysts said although the directorates action has hit many DSAs, the burden will gradually shift to the banks. The DSAs would practically be spared from an additional onus in future. The DGCEI move will have implications for banks accounting practices.

Banks with large exposure to home and auto loans businesses such as ICICI Bank and HDFC Bank used to reckon the commission foregone by the DSA as interest income from the customer and account for the same.

Following the DGCEI notice, these banks have now amended this practice and instead started adjusting the interest rates for a segment of existing customers.

That is, the commission foregone by agents will now benefit the customer in the form of an interest rate reduction, rather than as interest which they have not actually paid, but accounted for by the bank as received from them.

Currently, DSAs get around 5% of the loan amount as commission. This has driven a large number of educated youngsters to take up a career in the DSA space. In actual practice, competition has forced these agents to forego up to 60-70% of the commission.

Business auxiliary services was brought under service tax ambit with effect from July 1, 03. The DGCEI action is to recover the tax from DSAs with retrospective effect.
As for future cases, the onus will be on the banks.

Home | About Us | Terms and Conditions | Contact Us
Copyright 2016 CAinINDIA All Right Reserved.
Designed and Developed by Binarysoft Technologies Pvt. Ltd.
Enterprise Resource Planning Solutions ERP Solutions Enterprise Resource Planning Software Solutions ERP Software Solutions Supply Chain Management Solutions SCM Solutions Supply Chain Management Software Solutions SCM Software Solutions Enterprise Resource Planning Solutions India ERP Solutions India Enterprise Resource Planning Software Solutions India ERP Software Solutions India Supply Chain Management Solutions India SCM Solutions India Supply Chain Management Software Solutions India SCM Software Solutions India

Transfer Pricing | International Taxation | Business Consulting | Corporate Compliance and Consulting | Assurance and Risk Advisory | Indirect Taxes | Direct Taxes | Transaction Advisory | Regular Compliance and Reporting | Tax Assessments | International Taxation Advisory | Capital Structuring | Withholding tax advisory | Expatriate Tax Reporting | Litigation | Badges | Club Badges | Seals | Military Insignias | Emblems | Family Crest | Software Development India | Software Development Company | SEO Company | Web Application Development | MLM Software | MLM Solutions