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 and SUN]

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

Reverse charge liability on remittance deductions: exporter generally not liable when foreign bank charges inter-bank fees.
Bank remittance deductions are characterized as banking charges between banks and not services provided to the exporter; therefore, such deductions do not ordinarily attract reverse charge service tax liability on the exporter. A precautionary approach noted is voluntary payment of service tax and claiming CENVAT credit on input services to avoid litigation.