Is service tax apllicable for Charges received on Demand Draft

[nilesh akotkar]

Dear Sir

Is service tax applicable?, If we are taken demand draft charges from client and Demand draft is above ₹ 15 lacks in the financial year and charges taken is above ₹ 50000.00

[Rajagopalan Ranganathan]

Dear Nilesh,

Banks are liable to pay service tax on it other income like guarantee charges, LC/DD charges, loan processing fees, inspection charges, cheque return charges, foreign exchange commission charges, remittance charges, account maintenance charges, etc. As per para 4.14.1 of Taxation of Services an Education Guide by CBEC "therefore service tax would be levied on service charges normally charged for various transactions in money including charges for making drafts, letter of credit issuance charges, service charges relating to issuance of CDs/CPs etc.

AI Summary

Service tax on banking transaction charges applies to demand draft and similar fees, making banks liable for tax. Banks must pay service tax on service charges for various money-related transactions, including charges for making demand drafts, issuance of letters of credit, guarantee charges, loan processing fees, cheque return charges, foreign exchange commissions, remittance charges and account maintenance charges; such transaction-based service receipts are taxable under regulatory guidance and should be treated as part of taxable services.