Revised Service Tax on currency conversion would affect Indian exports

Industry chamber Assocham today said the government’s decision to revise taxes on currency conversion would increase transaction cost and hit the country’s exports.

“This charge, on the differential between RBI reference rate and the rate at which transaction is booked, will significantly increase transaction costs and decrease India’s competitiveness in global markets,” the apex chamber said.

The government has revised the policy, after Finance Minister Pranab Mukherjee proposed to introduce new methods to calculate service tax on forex transactions, in his Budget speech.

As of now the tax will be charged on one per cent of the difference between buying/selling rate and the Reserve Bank of India’s reference rate for the day multiplied by total units of the currency. The apex bank publishes market rates every noon to act as a reference rate.

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