No Service Tax on Foreign Currency Remittances: Finmin
The government on Tuesday clarified that service tax cannot be levied on foreign currency remittances into India as the transaction is actually executed outside the country. The move gives relief to a large number of non-residents who send funds to their families in states like Punjab and Kerala.
The Central Board of Customs and Excise (CBEC) said the definition of ‘service’ excludes transaction in money and hence not subjected to service tax. “In case any fee or conversion charges are levied for sending such money, they are also not liable to service tax as the person sending the money and the company conducting the remittance are located outside India,” Central Board of Customs and Excise stated here.
The Board explained that as per the Place of Provision of Service Rules issued this year, these services are deemed to be rendered outside the country. The same rule applies even if the Indian bank charges a fee for its part of the service. “It is further clarified that even the Indian counterpart bank or financial institution that charges the foreign bank or any other entity for the services provided at the receiving end, is not liable to service tax as he place of provision of such service shall be the location of the recipient of the service, that is, outside India,” Board said.
The clarification comes after concerns were raised about levying 12% service tax on such transactions under the negative list regime that came into force on July 1. India received about $ 64 billion of foreign remittances in 2011.
Financial Express, New Delhi, 11-07-2012