Page Contents
Multi-Level Marketing (MLM) is a marketing strategy in which the distributor is compensated for the sales of the other salespeople that they recruit. This recruited sales force is referred to as the participant’s “downline”, and can provide multiple levels of compensation.
In this model, distributors sell products directly to consumers by means of relationship referrals or by encouraging others to join the company as a distributor. In this model, usually three kinds of incentives/rewards are earned by the distributor-
Recently, in case of Smt. A. Vijaya vs. Commissioner of Central Excise, Salem (2016) (Chennai- CESTAT), while discussing the taxability of MLM model honorable tribunal held that:
Sale of goods by distributors to the seller is not in the nature of service but is in the nature of sale of goods, on which VAT is applicable because after sale, those products cease to belong to the company, but belong to the Distributor. Hence Service Tax is not applicable.
Incentive received for quantum of goods purchased by the distributor from the company is in the nature of voluble discount. Hence, outside the ambit of Service Tax.
The activity of a Distributor of identifying distributors is considered as Business Auxiliary service on which Service tax will apply.
The content of this article is intended to provide a general guide to the subject matter. Specialist advice should be sought about your specific circumstances; Hope the information will assist you in your Professional endeavors. For query or help, contact: singh@carajput.com or call at 9555555480
What is a Foreign Tax Credit (FTC)? A Foreign Tax Credit (FTC) is a provision that allows residents to claim… Read More
How to Obtain a Tax Residency Certificate (TRC): A Tax Residency Certificate (TRC) is essential for determining treaty benefits under… Read More
Important Amendment Regulations introduced to Corporate Insolvency Resolution Process The Insolvency and Bankruptcy Board of India (IBBI) has issued the… Read More
FAQs on ITR Filling Forms- Guide to select correct ITR Q.1 What does Form ITR-V and form ITR-Acknowledgement means? Form… Read More
Compliance Calendar under Companies Act and SEBI Act A compliance calendar helps companies track these and other regulatory requirements, ensuring… Read More
Easy Guidance on Meetings requirements as per Company Law Meetings under the Companies Act 2013 play a pivotal role in… Read More