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

Place of provision determines taxability: banking services to account holders provided where the bank is located, so no service tax.
Banking services to an account holder are treated as provided at the location of the bank; if the bank is located outside India, the place of provision is outside India and service tax does not arise, so reverse charge does not apply. If the recipient is not an account holder, the general place-of-provision rule may make the service taxable in India and attract reverse charge liability for the Indian recipient.