Remittance by NRIs fees to draw service tax

NEW DELHI: Remittances by non-resident Indians may become marginally costlier with the Central Board of Excise and Customs clarifying that commission or fee charged by agent based in India from the overseas agent will attract service tax. The apex indirect taxes body has issued a circular to clear the air regarding taxation of remittances and services provided by intermediaries.

The board has said no service tax will be payable per se on the amount of foreign currency remitted to India from overseas. However, an Indian bank or other entity acting as an agent to money transfer service operator, facilitating in the delivery of the remittance to the beneficiary in India for a fee will be liable to tax.

The board had issued a circular in July, 2012, after the country switched to negative list regime, wherein it had said there will be 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 latest circular comes after field formations highlighted that foreign money transfer service operators conducting remittances to beneficiaries in India had appointed Indian Banks and financial entities as their agents in India.