Service Tax on ATM Interchange

[VENKATRAMAYYA K]

At present, Acquiring banks are charging of ₹ 15+(1.85 service tax) to Issuing banks for each ATM cash withdrawal transaction. Issuing banks are recover ₹ 20 (including service tax 17.80+2.20) from their customers. I would like to know whether issuing banks needs to pay the service tax of ₹ 2.20 or ₹ 0.35 (2.2-1.85). Please suggest.

[PAWAN KUMAR]

Dear Sir,

As per my view, issuing banks need to pay service tax of ₹ 2.20.

[VENKATRAMAYYA K]

Hi, Thanks for sharing your view.

Issuing bank can adjust the service tax of ₹ 1.85 paid by Acquiring bank with recovered from customer of ₹ 2.20 as the transaction is same. Isn't double tax if issuer pay service tax of ₹ 2.20.

[DR.MARIAPPAN GOVINDARAJAN]

Thanks for the experts sharing their views in this regard.

AI Summary

Service tax on ATM interchange: whether issuing banks may offset tax paid by acquirers or must remit full tax.
A dispute concerns whether the issuing bank must remit the full service tax component charged to customers for ATM cash withdrawals or may offset the service tax already levied and paid by the acquiring bank on the same transaction, to avoid double taxation; the record contains practitioner views for both positions but no authoritative determination.