Revised tax on currency conversion to hit exports: Assocham

Assocham today said the Government's decision to revise taxes on currency conversion would increase transaction costs 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 the Finance Minister, Mr 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.

Disagreeing with the criteria, it said, taxing on the differential has no connection with the services provided by a bank.

It said the levy would be as good as imposing service tax on the profit or loss made by the money changers than on the services provided by the bank.

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