The TRU has issued Circular No. 163/14/2012-ST, Dated: July 10, 2012 to clarify the following issues:
1) No service tax will be leviable on the amount of foreign currency remitted to India from abroad:
“Service” has been defined under Section 65B (44) of the Finance Act, 1994. The definition specifically excludes “a transaction in money or actionable claim”. As the remittance of foreign currency from abroad is a transaction in money, therefore, it will fall outside the ambit of service. Accordingly, no service tax will be leviable on it.
2) No service tax on fee or conversion charges levied for sending such money from abroad:
Any consideration for service in relation to a transaction in money such as any fee or conversion charges is normally chargeable to service tax. However, in this particular case the service provider and service receiver are both located in non-taxable territory i.e. outside India. In terms of Place of Provision Rules 2012, such services are deemed to be provided outside India and thus, are not liable to service tax.
3) No service tax chargeable even if Indian counterpart of the foreign bank or any other entity charges for the services on their account:
The Circular clarifies that even if the Indian counterpart of the foreign bank or any other entity charges the service recipient for the services provided by them, no service tax will be chargeable. This is in terms of Rule 3 of the Place of Provision Rules, 2012 which provides that the place of provision of service shall be the location of the service receiver. As in this case, the service receiver is located outside India, i.e. in a Non-taxable territory, therefore, no service tax will be chargeable.
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Bimal Jain
FCA, ACS, LLB, B.Com (Hons)
Mobile: +9198106 04563
email: bimaljain@hotmail.com
Author Bio
Sir, Greetings to you. Whether the aforesaid circular 163/14/2012-ST of 10th July,2012,sufficiently answers the apprehension of Indian Agents and their sub-agents on the consideration in the form of commission and foriegn exchange component received by Indian agent in convertible foriegn currency from overseas money transfer entities and further the sub-agents from theirIndian principal agents ARE NOT SUBJECT TO SERVICE TAX ? Clarification required.