Foreign bank charges on export remittances do not trigger reverse-charge service tax without an Indian service recipient relationship.

Foreign-bank charges deducted from export proceeds do not constitute consideration for services received by an Indian exporter where the foreign bank provides letter-of-credit and remittance services to its overseas buyer-client. The exporter has no direct contractual or service-recipient relationship with the foreign bank and receives relevant banking services from its Indian banker when export documents are negotiated. As the foreign service provider and its recipient are outside the taxable territory, foreign-currency remittance and deductions retained by the foreign bank do not establish a taxable service received in India. Accordingly, the exporter is not liable to service tax under the reverse charge mechanism.

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Issues: Whether foreign-bank charges deducted from export proceeds are consideration for a service received by the assessee in India and liable to service tax under the reverse charge mechanism.

Analysis: The foreign bank provided letter-of-credit and remittance-related services to the overseas buyer, its client. The assessee had no direct contractual or service-recipient relationship with that foreign bank; any service received by it was from its Indian banker, with which the export documents were negotiated. Since both the foreign service provider and its recipient were outside India, the relevant service was outside the taxable territory. The remittance of foreign currency and deductions retained by the foreign bank did not establish receipt of a taxable service by the assessee in India.

Conclusion: Foreign bank charges were not consideration for any service supplied to the assessee in India; consequently, no service tax was payable by the assessee under the reverse charge mechanism.

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