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Government of India
Ministry of Finance
Department of Revenue
Central Board of Excise and Customs
Tax Research Unit
Circular No. 180/06/2014 – ST
Room No 153, North Block, New Delhi
Dated 14th October, 2014
To
Chief Commissioner of Customs and Central Excise (All)
Chief Commissioner of Central Excise & Service Tax (All)
Director General of Service Tax
Director General of Central Excise Intelligence
Director General of Audit
Commissioner of Customs and Central Excise (All)
Commissioner of Central Excise and Service Tax (All)
Commissioner of Service Tax (All)
Madam/Sir,
Subject: - Levy of service tax on activities involved in relation to inward
remittances from abroad to beneficiaries in India through MTSOs- reg.
Vide
circular No. 163/14/2012–ST, dated 10th July, 2012, on the issue of levy of
service tax on the activities involved in the inward remittance it was clarified
that 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. It was also clarified that the Indian
bank or financial institution who provides service to the foreign bank or any
other entity is not liable to service tax as the place of provision of service
shall be the location of the recipient of service. This clarification covers the
scenario where the Indian bank or financial institution provides services on
principal to principal basis to the foreign bank/entity, on its own account, and
thus the service is covered by the general rule, i.e. rule 3 of the Place of
Provision of Service Rules, 2012.
2. However, subsequently, it had been brought to the notice of the Board that
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 located outside India (say ‘A’) approaches a Money Transfer
Service Operator (MTSO)/bank (say B) located outside India for remitting the
money to a beneficiary in India; ‘B’ charges a fee from ‘A’.
Step 2: ‘B’ avails the services of an Indian entity (agent) (say ‘C’) for
delivery of money to the ultimate recipient of money in India (say ‘E’); ‘C’ is
paid a commission/fee by ‘B’.
Step 3: ‘C’ may avail service of a sub-agent (D). ‘D’ charges fee/commission
from ‘C’.
Step 4: ‘C’ or ‘D’, as the case may be, delivers the money to ‘E’ and may charge
a fee from ‘E’.
- Clarifications have been sought as to 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.
Clarifications have also been sought as to whether the services provided by sub
agent (referred in step 3 & 4 above) are leviable to service tax and on certain
other related issues.
- The issues discussed above have been examined and it is clarified as
follows,-
- Accordingly,
Circular No. 163/14/2012-ST, dated 10.7.2012 stands superceded.
- Trade Notice/Public Notice may be issued accordingly.
- Please acknowledge the receipt of this circular. Hindi version to follow.
Yours sincerely,
(Dr. Abhishek Chandra Gupta)
Technical Officer, TRU
Tel: 011-2309 2037
F. No 354/105/2012-TRU (Pt.)
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