Payment of service tax on reversed charge method -Reg

[vinay wakde]

We are exporting finished goods to foreign country & raising the commercial invoice in the name of foreign buyer. While receiving the payment, the foreign bank deducted some remittance amount. Whether such remitted amount  is within the scope of  recovery of  service tax from us on reversed charge method? Whether Input service credit is eligible after payment of service credit.

Regards,

 

VINAY

[YAGAY andSUN]

You may pay the service tax and avail the CENVAT credit on Input Services to avoid any litigation.  But deduction of charges by foreign bank from foreign remittance against supply of goods does not tentamount to any services provided by the foreign bank, directly to you.

[vinay wakde]

We have add new catagory of Service "Bank and other Financial Service" in our existing Service Tax Registration certificate for payment of service tax on reverse charged method. We are paying the Service Tax w.e.f. 16.05.2008 till date. Kindly confirm effective date i.e. 16.05.2008 is correct for above catagory of service.

Regards,

VINAY

 

 

[Rishabh Gugale]

Dear Vinay,

In my opinion, the foreign bank has remitted the money to your Indian Bank and the amount charged is the Banking Charges and not Commission.  Since it is inter bank transaction at present it is the service provided and recieved within two banks.  The exporter is not required to pay service tax under reverse charge mechanism.  Regards

Narendra

AI Summary

Discussion on Reverse Charge Mechanism: No Service Tax on Foreign Bank Charges for Export Remittance. Clarification on CENVAT Credit. A discussion on a forum addresses whether service tax is applicable under the reverse charge mechanism for charges deducted by a foreign bank during remittance for exported goods. One participant suggests paying the service tax and availing of CENVAT credit to avoid litigation, while another clarifies that the deduction is a banking charge, not a commission, and does not constitute a service directly provided to the exporter. Therefore, the exporter is not required to pay service tax under the reverse charge mechanism. Additionally, there is a query about the correct effective date for a service tax category registration.