Service tax on Foreign Bank Charges

This query is : Resolved

Vijay Chitte (Querist)
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28 April 2009 The process of realization of export proceeds from buyer, two banks viz exporter’s bank in India and nodal bank in foreign country render their service
and both of them recover ‘Bank Charges’ for services rendered by them.

When an exporter receives export proceeds, their Bank in India sends export documents to their Foreign Bank for further necessary action. Such foreign banks then proceed further and realize export proceeds from buyers. They remit the export proceeds at prevalent foreign exchange rate after deducting their Service Charges to Exporter’s Bank in India.

Whatever charges deducted by Foreign bank, Service tax is liable on it?

Rajesh Kumar

Rajesh Kumar (Expert)
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30 April 2009 No. The services has not been received in India. For imposing ST on reverse charge method under Section 66A, receipt of service in india is required.

Vijay Chitte

Vijay Chitte (Querist)
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01 May 2009 Whereas exporter’s bank in India has been found to be paying service tax in all the cases, on contrary if the foreign bank deduct some charges, How can you said that this service not fall under section 66A, eventhough it is perticularly mentioned in (a) Service Provided or to be provided by a person who has established a business or has his permanent address or usual place of residence, in a country other than India, and

(b) received by a person (hereinafter referred to as the recipient) who has his place of business, fixed establishment, permanent address or usual place of residence, in India, such service shall, for the purpose of this section, be taxable service, and such taxable
accordingly all the provisions of this Chapter shall apply.”

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