GST Liablity on Foreign Bank Charges on Inward Remittance

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AJM_India

Director

75 Points Posted on 13 April 2024

Hi All

We are a merchant exporter of chemicals. On the inward remittances we receive against our exports , the foreign bank also deducts remittance charges to the tune of US$ 100 - US$ 250 per remittance. We account for these as "Foreign bank Charges". Ofourse our Indian bank also deducts their own bank charges and they levy GST on these charges as well..,

Recently we had a GST Central Audit in our company and one of the claims by the GST team was our liability to pay GST on the Bank charges deducted by the foreign banks.

I am not sure if this is approved by law as the entity (Foreign bank) deducted the charges is not even located in India.
if it is indeed true, it is completely a useless liability for the exporter and needs to be disputed.

Can our learned friends throw some light on this matter.

Replies (3)

Quick Summary

A merchant exporter is seeking clarification on whether they are liable to pay GST on charges deducted by foreign banks for inward remittances received against exports. The exporter questions this liability as the foreign bank is not located in India. The discussion references potential Reverse Charge Mechanism (RCM) applicability and suggests consulting a GST professional for guidance, as tax authorities may press for demand on this issue.

CA Raj Doshi

Practising CA

8954 Points Posted on 14 April 2024

Notification 10/2017 Integrated Tax ( Rate ).

RCM is applicable on below services @ 18% ( foreign bank charges )

Any service supplied by any person
who is located in a non-taxable
territory to any person other than
non-taxable online recipient.

It can be construed that the foreign bank is providing export remittance services to the Indian businessman while it remits the money after securing their charges.

There is no specific mention but broadly as per reading, it looks like the GST Department is correct.

Alternatively, it can be argued and matter can be appealed stating that the foreign customer is actually the service receiver however the Indian exporter is only a beneficiary of the service. A legal person might be able to give you a fair idea about the success of your case.

Regards
R C D & Co.
Chartered Accountants