RCM ON FOREIGN BANK CHARGES

[NILESH PITALE]

Dear Expert - Observation raised by GST Officer During The Audit

My Client is exporter, Importer & Local Trader

Observation : NON-PAYMENT OF RCM ON FOREIGN BANK CHARGES: During the course of Audit, It is seen that foreign bank have deducted the bank charges against receipt of foreign currency. The banks are deducting charges for remittance of money. The location of the supplier i.e. Bank is outside India and location of the recipient is in India (taxable territory). from the data provided. it is seen that a certain amount of charges are shown as short receipt which are actual the Bulk Charges of the foreign Bank. The Service provided by foreign bank for remittance to export proceeds is liable to GST as per Notification No. 10/2017-Integrated Tax (Rate), dated 27.06 2017, which stipulates that any service supplied by any person who is located in a non-taxable territory to any person located in a non-taxable territory, the person located in the taxable territory will be paid on reverse charge basis by the recipient of such services---------------- is it RCM Applicable Please Guide

AI Summary

Reverse Charge Mechanism on foreign bank charges may fall on the Indian bank rather than the exporter.
RCM on foreign bank charges for remittance of export proceeds depends on identifying the service recipient. Indian banks that collect foreign payments and remit proceeds are typically treated as the service recipient and thus liable under RCM, while exporters who do not receive or pay for the foreign bank's service are generally not liable. Liability is determined by factual matrix, contractual allocation and payment flows; obtain bank confirmation and documentation to rebut audit demands. A tribunal order set aside departmental demands and the matter is under further appeal.