Service tax Applicability of foreign exchange profit

[Asked by Guest]

Sir,

  I am a tour operator. I received USD from Foreign countries and i remit the service tax asper the receipt of USD date. But profit arises at the time of converting USD into Indian rupee. these profit is taxable or not?. or its shown as foreign exchnage profit in P&L account

[Vivek Harsh]

 

In my view Service tax liability may arise.

[Mahir S]

My personal view is that Profit is surely taxable; but not under any Service tax head as no Services provided/received herein.

Any Chartered Acccountant may please advise under which heading the same can exactly and properly be shown in the Balance Sheet/P & L Account..

[YAGAY and SUN]

No service tax will be applicable on the profit amount.  But on currency conversion charges service tax will be applicable.

[Dilip Darji]

Dear sir.

You might have earned something towards Currency Conversion Cgharges but you did not sent any Invoice/bill to your customer and therefore there is no question of making payment of Service Tax on profit eared on converson of currency. Service Tax is on service provided and not on the profit earned.You may have to pay Income tax on such profit but not the Service Tax.

[Mahir S]

Thanks a lot Mr. Dilipji for your views on the query...

AI Summary

Service tax on foreign exchange profit: conversion charges may attract service tax, gains generally treated as taxable income.
Whether foreign exchange gains on converting foreign currency receipts attract service tax or should be treated as foreign exchange profit for income-tax purposes; currency conversion charges that are billed may attract service tax, while exchange gains are ordinarily recorded as foreign exchange profit and subject to income-tax treatment.