Reforms in Reporting Service - CBEC scraps 15 reports for its offices - why not extend it to the assessees too?

The clarification issued by the Board from time to time seeks to further complicate the issue of service tax on the foreign remittance received in India from abroad. It is submitted that the in a transaction of foreign remittance, both foreign bank and Indian bank collects certain service charges. The moot question is regarding the leviability of service tax on such charges. It is submitted that the said services are classifiable under banking and financial services and are governed by Rule 9 of the Place of Provision of Service Rules, 2012. Accordingly, the place of provision of service will be the location of the service provider. Therefore, no service tax will be leviable on the charges collected by foreign bank but service tax is leviable on the charges collected by the Indian Bank from either the beneficiary in India or from the foreign bank. The situation is clear but unnecessary complexities have been added into it. Even the old circular wrongly applies Rule 3 of the Place of Provision of Service Rules, 2012 in case when Indian bank collects charges from the foreign bank because when there is Rule 9, the same would apply being specific and appearing later in the Rules. It is also being reported that almost all the exporters are being issued letters regarding payment of service tax on commission paid to foreign agents, foreign banks etc. without even appreciating the provisions prevalent in this regard. It is hoped that the statutory provisions are correctly interpreted by the demand issuing authorities so that unnecessary litigation is avoided.

CA PRADEEP JAIN

Pradeep Jain Jain 16/10/2014