Service Tax Department has issued Circular No. 180/06/2014-ST dated 14th October,
2014 in suppression of Circular No. 163/14/2012-ST
dated 10th July, 2012.
As per Circular No. 163/14/2012–ST dated 10.07.12 - There is no service tax per se on the foreign exchange
remitted to India from outside
for the reason that money does not constitute a service and that conversion
charges or fee levied for sending such money would also not be liable to
service tax as the person sending money and the company conducting the
remittance are both located outside
India.
The foreign money
transfer service operator (MTSO), conducting remittances to beneficiaries in
India, have appointed Indian Banks/financial entities as their agents in India
who provide agency /representation service to such MTSO for furtherance of
their service to a beneficiary in India. The agents are paid a commission or
fee by the MTSO for their services.
The entire sequence of
transactions in remittances of money from overseas through the MTSO route is as
under:
Step 1: Remitter R ( outside
India ) approaches a B ( Bank- MTSO Transfer
Service Operator (MTSO) located outside India ) for remitting the money
to a beneficiary in India ‘R’ Pays
to B’.
Step 2: ‘B’ avails the services of an IE ( Indian Entity/ Agent)
for delivery of money to the UR - ultimate
recipient of money in India B pays to IE
.
Step 3: IE’ may avail service of SA ( Indian sub-agent ) IE’ Pays to SA’.
Step 4: ‘IE or ‘SA’, delivers the money
to ‘UR’
Now Clarifications was sought
- Whether such agents
(referred in Step 2 above) would fall in the category of intermediary, and if
so, whether service tax would be leviable on the commission/fee amount charged
by such agents.
- Whether the services
provided by sub agent (referred in step 3 & 4 above) are leviable to service tax and on certain other related
issues.
Circular No. 180/06/2014-ST dated 14th October,
2014 now clarifies as follows,-
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S.
No.
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Issues
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Clarification
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1
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Whether service tax is payable on remittance received in
India from abroad?
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No service
tax is payable per se on the
amount of foreign currency remitted to India from overseas. As the remittance
comprises money, it does not in itself constitute any service as per clause
(44) of section 65B. define service of
the Finance Act 1994.
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2
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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?
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Yes. The Indian bank or other entity acting as an agent to
MTSO in relation to money transfer,
facilitates in the delivery of the
remittance to the beneficiary in India. In performing this service, the
Indian Bank/entity facilitates the provision of Money transfer Service by the
MTSO to a beneficiary in India. For
their service, agent receives commission or fee. Hence, the agent falls in
the category of intermediary as defined in rule 2(f) of the Place of
Provision of Service Rules, 2012.
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3
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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?
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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.
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4.
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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 bank/entity/agent/sub-agent
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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.
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5.
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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?
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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.
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6.
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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?
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Sub-agents also fall in the category of intermediary.
Therefore, service tax is payable on commission received by sub-agents from
Indian bank/entity.
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