Service tax for Money transfer Payment commission
This query is : Resolved
12 November 2009
We are a proprietor company with money transfer as main business. We deal with most of the money transfer providers in the world. We earn commission for the payment made to the beneficiaries. All together our commission is less than Rs.2.00 lacs per year. I just want to know whether money transfer comes under Business Auxiliary Service. If yes, then will the threshold limit is applicable to us. Pls clarify?
Guest
Guest
(Expert)
12 November 2009
If you are providing service to a foreign agency like WUM, your service may qualify as export as clarified by the Board.
Threshold limit is not applicable in the case of import of services. As you are service provider and your gross taxable value is below Rs 10 Lakh, you are not liable to pay service tax.
Threshold limit is not applicable in the case of import of services. As you are service provider and your gross taxable value is below Rs 10 Lakh, you are not liable to pay service tax.
12 November 2009
Agreed with expert Dinesh Kumar. Ensure that you receive the money to your account in India in foreign exchange. You are not liable to pay service tax on these amounts. However, although nothing is written in the law, department is asking the provider of service to register on crossing 9 lakhs even though commission received being service export is not taxable. It seems you have to register but not pay.
12 November 2009
Fine, If i receive the commission from a WU primary agent in India in INR, then what will be the case? Will i come under treshold limit?
24 July 2025
Here’s a detailed explanation addressing your query about service tax on money transfer commission, especially when commission is received in INR from a domestic agent:
1. Does money transfer service qualify as Business Auxiliary Service?
Yes, money transfer commission services are generally classified under Business Auxiliary Services as per service tax classifications.
These services involve facilitating payments, handling transactions, and acting as intermediaries.
2. Threshold Limit Applicability
The basic threshold limit for service tax registration and payment is Rs. 10 lakhs of taxable turnover per financial year.
If your commission income (taxable service turnover) is below Rs. 10 lakhs, you are not required to register or pay service tax.
3. Commission received from foreign entity (export of service)
If you receive commission from a foreign principal (like Western Union USA) and the payment is received in foreign exchange in your Indian bank account, it qualifies as export of service.
Export of services is zero-rated and exempt from service tax.
In this case, threshold limits do not apply, i.e., even if turnover exceeds Rs. 10 lakhs, you are not liable to pay service tax but may be required to register.
4. Commission received from an Indian agent in INR
If you receive commission from a domestic agent (like a Western Union primary agent in India) and the commission is paid in INR, this is treated as a domestic taxable service.
In this scenario, the threshold limit of Rs. 10 lakhs applies.
If your commission income is less than Rs. 10 lakhs, you are not liable to pay service tax or register.
If it exceeds Rs. 10 lakhs, you are required to register and pay service tax on the commission income.
Summary Table
Situation Service Tax Applicability Threshold Limit
Commission from foreign principal in foreign exchange Export of service, zero-rated, no tax payable but registration required Threshold does not apply
Commission from Indian agent in INR Taxable service, liable for service tax if turnover > Rs. 10 lakhs Threshold applies (10 lakhs)
Practical Note
Department may ask you to register even if commission is below Rs. 10 lakhs, especially if you regularly receive payments from multiple sources. This is mostly a compliance caution.
You may choose to register voluntarily if you want to avail input credits or to avoid future compliance issues.
1. Does money transfer service qualify as Business Auxiliary Service?
Yes, money transfer commission services are generally classified under Business Auxiliary Services as per service tax classifications.
These services involve facilitating payments, handling transactions, and acting as intermediaries.
2. Threshold Limit Applicability
The basic threshold limit for service tax registration and payment is Rs. 10 lakhs of taxable turnover per financial year.
If your commission income (taxable service turnover) is below Rs. 10 lakhs, you are not required to register or pay service tax.
3. Commission received from foreign entity (export of service)
If you receive commission from a foreign principal (like Western Union USA) and the payment is received in foreign exchange in your Indian bank account, it qualifies as export of service.
Export of services is zero-rated and exempt from service tax.
In this case, threshold limits do not apply, i.e., even if turnover exceeds Rs. 10 lakhs, you are not liable to pay service tax but may be required to register.
4. Commission received from an Indian agent in INR
If you receive commission from a domestic agent (like a Western Union primary agent in India) and the commission is paid in INR, this is treated as a domestic taxable service.
In this scenario, the threshold limit of Rs. 10 lakhs applies.
If your commission income is less than Rs. 10 lakhs, you are not liable to pay service tax or register.
If it exceeds Rs. 10 lakhs, you are required to register and pay service tax on the commission income.
Summary Table
Situation Service Tax Applicability Threshold Limit
Commission from foreign principal in foreign exchange Export of service, zero-rated, no tax payable but registration required Threshold does not apply
Commission from Indian agent in INR Taxable service, liable for service tax if turnover > Rs. 10 lakhs Threshold applies (10 lakhs)
Practical Note
Department may ask you to register even if commission is below Rs. 10 lakhs, especially if you regularly receive payments from multiple sources. This is mostly a compliance caution.
You may choose to register voluntarily if you want to avail input credits or to avoid future compliance issues.
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