SERVICE TAX ON PROCEESSING FESS BY FOREIGN BANK

[SNEHAL SHAH]

R/sir,

We have applied Term Loan from Foreign Bank Branch located at Japan & Processing fess for term loan paid in Foreign Currency 10000 US DOLLAR .

Is Service Tax Liability on this Processing fess on Indian Company ? if Yes please brief .

Advance thank for valuable reply .

Thanks and Regards,

SNEHAL SHAH

[YAGAY andSUN]

Yes, you are liable to pay the service tax under Reverse charge mechanism read with Place of provisions of services Rules.  Further, you may avail the CENVAT credit on the strength of the GAR-7 Challan.

[sanjeev bajaj]

Yes, it is service as the processing fee is not covered in negative list.

Agreed as it is payable on reverse charge mechanism.

 

(Sanjeev Bajaj)

AI Summary

Reverse charge liability applies to cross-border loan processing fees, with place-of-provision rules determining taxability and CENVAT credit. Service tax is chargeable on processing fees paid by an Indian company to a foreign bank branch under the Place of Provision of Services rules because the fee is not covered by the negative list. The tax liability arises on the recipient under the Reverse Charge Mechanism, and the recipient may discharge the liability and claim CENVAT credit, with payment evidence such as the GAR-7 challan supporting credit eligibility.