Service tax on processing charges in respect of ECB availed from foreign banks.

[Kadayam Ganapathy Subramanian]

Dear Sirs,

A company 'x' situated in India is the account holder of Bank situated outside India has availed the External commercial borrowing from the said bank and paid the processing charges to them in foreign currency for availing the said facility.

Our question is whether service tax is not to be paid on processing charges collected by the said bank since this bank rendering the above service is situated outside India which is the place of provision of service as per Rule 9(a) of PPS Rules 2012 issued under Section 66C(1) 

                                                                 OR

Whether the service tax is liable to be paid by Company 'x' on processing charges under reverse charge mechanism as per Notification No.30/2012-ST dt 20.06.2012 issued under Section 68(2).

Kindly provide your expert opinion in this regard.

Regards,

K.G Subramanian

e.mail ID: subramaniankg at the rate of microlabs.in

AI Summary

Must Indian Companies Pay Service Tax on Foreign ECB Processing Charges? Rule 9(a) and Reverse Charge Debated A discussion on whether a company in India must pay service tax on processing charges for an external commercial borrowing (ECB) from a foreign bank. The debate centers on the Place of Provision of Service Rules, 2012, and the reverse charge mechanism under Notification No. 30/2012-ST. One perspective argues that service tax is due under reverse charge since the service provider is outside India. Another view suggests that the service is not taxable as the place of provision is outside India, per Rule 9(a). The consensus leans towards non-liability if the company is an account holder, as per specific provisions.