Comments
Sending or receiving foreign exchange will not attract service tax. This will benefit exporters, families of students studying abroad and people receiving remittances from abroad.
The Central Board of Excise and Customs (CBEC) has said in a notification: “There is no service tax per se on the amount of foreign currency remitted to India from overseas.”
It explained that in the negative list regime, the term ‘service’ excludes transactions in money. As the remittance comprises money, the activity does not comprise a ‘service’ and is thus not subjected to service tax.
Location
At the same time, it also said that in case any fees or conversion charges are levied for sending foreign exchange, they are also not liable to service tax as the person sending the money and the company conducting the remittance are located outside India.
In terms of the Place of Provision of Services Rules, 2012, such services are deemed to be provided outside India and thus not liable to service tax, it explained
The notification further clarified that even Indian banks or financial institutions that charge the foreign bank or any other entity for services provided at the receiving end, are not liable to service tax as the place of provision of such service will be the location of the recipient of the service — that is, outside India.
The exporter community has expressed satisfaction at these clarifications. The President of Federation of Indian Export Organisations (FIEO), Mr M. Rafeeque Ahmed, said that this would provide relief to the MSME export sector burdened with high interest costs vis-à-vis competitors in the global market.
Deficit control
Moreover, payments made abroad for imports in the course of exports or otherwise require commensurate margins for service tax payments. This has been done away with, which also provides a measure of relief.
The FIEO chief stated that remittances play an important role in addressing the trade deficit, as they are the single largest source of unconditional inflow of foreign exchange to India.
Such remittances amounted to $64 billion in 2011, according to World Bank estimates.
“Given the slowdown or declining levels of foreign exchange, service tax could only act as a deterrent to precious incoming foreign exchange.
The waiver of service tax on the same would ensure that this stable source of foreign exchange would continue to maintain the delicate Balance of Payments (BoP) balance for India in this moment of global crisis,” he added.
Comments
COMMENT NOW
Comments
Comments have to be in English, and in full sentences. They cannot be abusive or personal. Please abide by our community guidelines for posting your comments.
We have migrated to a new commenting platform. If you are already a registered user of TheHindu Businessline and logged in, you may continue to engage with our articles. If you do not have an account please register and login to post comments. Users can access their older comments by logging into their accounts on Vuukle.