Service Tax on activities related to Inward Remittance

Earlier, department has issued Circular
No. 163/14/2012-ST dated 10th July, 2012
on the issue of
levy of service tax on activities involved in the inward remittance. This
clarification covers the scenario where the Indian bank/financial institution
provides services on principal to principal basis to foreign bank/entity.
Taxability of transaction where foreign Money Transfer Service Operator (M

has appointed Indian Banks/financial entities as agent was left to be
Now, to clarify taxability of transactions under both scenario’s
department has issued Circular
No. 180/06/2014-ST dated 14th October, 2014 vide F. No.
354/105/2012-TRU (Pt.)
in suppression of Circular No. 163/14/2012-ST
dated 10th July, 2012.
Taxability of various transactions related to inward remittances
is as under:
S. No.
Whether service tax is
payable on remittance received in India from abroad?
No service tax is
payable per se
on the amount of foreign currency remitted to India from overseas being
transaction in money specifically excluded from the definition of service.
Whether the service of
an agent or the representation service provided by an Indian entity/ bank to
a foreign money transfer service operator (MTSO) in relation to money
transfer falls in the category of intermediary service?
Whether service tax is
leviable on the service provided, as mentioned in point 2 above, by an
intermediary/agent located in India (in taxable territory) to MTSOs located
outside India?
Service provided by an
intermediary is covered by rule 9
(c) of the Place
of Provision of Service Rules, 2012. As
per this rule, the place of provision of service is the location of service
provider. Hence, service provided by an agent, located in India (in taxable
territory), to MTSO is liable to service tax.
The value of intermediary
service provided by the agent to MTSO is the commission or fee or any similar
amount, by whatever name called, received by it from MTSO and service tax is
payable on such commission or fee.
Whether service tax
would apply on the amount charged separately, if any, by the Indian
bank/entity/agent/sub-agent from the person who receives remittance in the
taxable territory, for the service provided by such Indian
Yes. As the service is
provided by Indian bank/entity/agent/sub-agent to a person located in taxable
territory, the Place of Provision is in the taxable territory. Therefore,
service tax is payable on amount charged separately, if any.
Whether service tax
would apply on the services provided by way of currency conversion by a bank
/entity located in India (in the taxable territory) to the recipient of
remittance in India?
Any activity of money
changing comprises an independent taxable activity. Therefore, service tax
applies on currency conversion in such cases in terms of the Service Tax
(Determination of Value) Rules. Service provider has an option to pay service
tax at prescribed rates in terms of Rule 6(7B) of the Service Tax Rules 1994.
Whether services
provided by sub-agents to such Indian Bank/entity located in the taxable
territory in relation to money transfer is leviable to service tax?
Sub-agents also fall
in the category of intermediary. Therefore, service tax is payable on commission
received by sub-agents from Indian bank/entity.
the information will assist you in your Professional endeavors
RECOMMENDED READ  Service Tax Implication Co-operative Society

Share this post

  • Decreases exchange costs and pointless wastages:A single enlistment and a solitary consistence will suffice for both SGST and CGST gave government produces powerful IT foundation and reconciliation of states level with the union.