Summary
Indian exporters need not pay Service Tax on export commission when there’s no direct contractual link with the foreign agent, as clarified by courts. This reduces export costs and aligns with India’s policy to boost foreign trade. Learn more with Efiletax’s expert support.
Why No Service Tax on Export Commission?
Indian exporters often pay commission to foreign agents for procuring export orders. Whether this commission attracts Service Tax has been a point of dispute. The good news: No Service Tax on export commission applies if there’s no direct contractual nexus with the foreign agent.
Key Phrase: No Service Tax on Export Commission
Legal Basis: What the Courts Say
- Landmark Case:
In Commissioner of Service Tax vs. Bechtel India Pvt. Ltd. [2023-TIOL-28-SC-ST], the Supreme Court held that export commission paid to a foreign agent for securing orders abroad does not attract Service Tax if the agent operates outside India and there is no direct service provided in India. - Circular Reference:
CBEC’s Circular No. 111/05/2009-ST clarifies that commission paid to overseas agents is considered an export of service under Rule 3 of the Export of Services Rules, 2005 — hence, not taxable. - Recent Trends:
Various High Courts and CESTAT benches have upheld this principle to avoid double taxation and to promote exports.
Conditions for Non-Taxability
To safely claim No Service Tax on Export Commission, ensure:
✅ The foreign agent has no office in India.
✅ The agent’s services are used outside India.
✅ Commission is paid in convertible foreign exchange.
✅ There is no direct agreement obligating the agent to perform services in India.
Example Table: Taxability of Export Commission
| Scenario | Service Tax Applicable? |
|---|---|
| Foreign agent with office in India | Yes |
| Foreign agent without India office, paid in foreign currency | No |
| Direct marketing support inside India | Yes |
| Agent arranges orders abroad only | No |
Expert View: Practical Tip
👉 Always keep proof — like agreements, bank advice for foreign remittance, and agent’s declaration — to defend your position during audits. This reduces litigation risk.
FAQs on No Service Tax on Export Commission
Q1: Is GST applicable on export commission now?
Currently, under GST regime, services provided by a foreign agent for exports are treated as an export of services (zero-rated) if conditions under Section 2(6) of the IGST Act are met.
Q2: What if the foreign agent has an India office?
Then the commission may attract Service Tax (in pre-GST cases) or GST now, since part of the service is considered to be supplied within India.
Q3: Should I file any declarations?
Yes. File LUT (Letter of Undertaking) for zero-rated supply and maintain supporting export documents.
Final Thoughts
✅ The principle of No Service Tax on Export Commission is settled under Indian tax law when proper conditions are met. This helps exporters remain competitive globally.