There is always mystery attached to the process of auctioning as it is a special process of buying and selling goods or services through open participation and then selling them to the highest bidder. Participants in an auction may or may not know the identities or actions of other participants. Depending on the auction, bidders may participate in person or through authorized representatives or remotely through a variety of means, including telephone and the internet. The seller usually pays a commission to the auctioneer or auction company which is a percentage of the final sale price.
In Service Tax, Auctioneer’s Service was introduced in 2006.
According to Section 65 (105) (zzzr), any service provided or to be provided; to any person, by any other person, in relation to auction of property, movable or immovable, tangible or intangible, in any manner, but does not include auction of property under the directions or orders of a court of law or auction by the Government.
According to Section 65 (7a), “auction of property” includes calling the auction or providing a facility, advertising or illustrating services, pre-auction price estimates, short-term storage services, repair or restoration services in relation to auction of property.
In the definition of Auctioneer, the phrase “by the government” has given rise to confusion. In a property belonging to or vested in the Central or the State governments (such as goods confiscated by Customs department) and sold in an auction conducted by private organizations and a contrary can of government bodies like ‘Tobacco Board’ conducting auction of properties that belong to private individuals or organizations whether excluded or covered under the definition was not clear.
In order to overcome the confusion, it is now clarified in the union budget 2010 through an explanation that the phrase ‘auction by government’ appearing in the taxable service which is excluded from the definition of Auctioneer Service means an auction where government property is being auctioned and not when the government acts as an auctioneer for the private goods.
By virtue of insertion of this explanation to the definition of taxable service “Auctioneer’s Service” under section 65(105) (zzzr), it is now clarified that the Service Tax liability will not arise in the case of government property being auctioned and in the case where government acts as an auctioneer to private property, it is covered under the definition of Auctioneer’s Service.
Taxable Services: Auctioneer Service