Press Information Bureau

Government of India

Ministry of Finance

10-July-2012 18:6 IST

CBEC issues Clarification Regarding Leviability of Service Tax on the Remittance of Foreign Currency in India from Overseas

The Central Board of Excise and Customs (CBEC) issued today necessary clarification regarding the leviability of service tax on the remittance of foreign currency in India from overseas. Various concerns have been expressed at different forums in this regard.

The CBEC through a circular issued today stated that the matter has been examined and it is clarified that there is no service tax per se on the amount of foreign currency remitted to India from overseas. In the negative list regime, ‘service’ has been defined in clause (44) of section 65B of the Finance Act 1994, as amended, which excludes transaction in money. As the amount of remittance comprises money, the activity does not comprise a ‘service’ and thus not subjected to service tax.

In case any fee or conversion charges are levied for sending such money, they are also not liable to service tax as the person sending the money and the company conducting the remittance are located outside India. In terms of the Place of Provision of Services Rules, 2012, such services are deemed to be provided outside India and thus not liable to service tax.

It is further clarified that even the Indian counterpart bank or financial institution who charges the foreign bank or any other entity for the services provided at the receiving end, is not liable to service tax as the place of provision of such service shall be the location of the recipient of the service, i.e. outside India, in terms of Rule 3 of the Place of Provision of Services Rules, 2012.

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DSM/SS

Service tax on foreign currency remittance not leviable when the transaction is money; offshore provision and fees fall outside scope. Clarification states that remittance of foreign currency is not a taxable service because transactions in money are excluded from the definition of service, and thus such remittances are not subject to service tax. Fees or conversion charges are likewise not taxable when the remitter and remittance provider are located outside the territory, as the Place of Provision of Services Rules deem those services provided outside the territory. Charges by an Indian receiving bank on an overseas recipient are also not taxable since the place of provision is the recipient's location outside the territory under Rule 3.