Service tax in case of money changers

Queries 3764 views 6 replies

Mukunda

Chartered Accountant

28 Points Joined September 2008

Hello All,

With recent amendment in the service tax, forex broking include money changers, therefore money changers are required to charge service tax on the consideration for services rendered, provided the consideration is charged seperately in the invoice, Otherwise money changes will have option to pay services tax @ .25% of Gross Currecny exchanged.

However my clinet would like to charge service tax on consideration charged in the invoice seperately instead of paying @ .25% of Gross currency exchanged, but the consideration charged in the invoice is fixed irrespective of amount of currency exchanged, accordingly his services tax liability does not varry with quantum of business as his consideration is fixed per transaction. Now my question is whether the trading margin(difference b/w buying and selling rate) to be considered or not for the purpose of taxable services. If yes on what ground?

Pls advise on this

Mukund

Replies (6)

chamatkaribaba

Practicing Indirect Tax

97 Points Joined November 2008

I think your question is not very clear. can you elaborate what exactly you wishes to know?

CA Annie

Chartered Accountant

747 Points Joined April 2008

As per service tax circular No 92/2007,

Service tax is leviable on foreign exchange (forex) broking service under the category of ‘banking and other financial service’. In terms of the provisions of the Finance Act, 1994, foreign exchange broker includes a money changer (authorized dealer of foreign exchange). In this context, a question has arisen as to whether the service provided by a money changer in relation to exchange of foreign currency is a forex broking service for applicability of service tax levy under ‘banking and other financial services’.
The issue has been examined by the Board. It was noted that ‘money changing’ and ‘foreign exchange broking’ are two distinct activities. Money changing is an activity of sale and purchase of foreign exchange at the prevalent market rates. On the other hand, foreign exchange broking is the activity performed as an intermediary, on a commission/brokerage basis, for facilitating the clients who wish to buy or sell foreign exchange. The foreign exchange broker providing foreign exchange broking service does not hold title to the foreign exchange. Accordingly, Board is of the view that service tax is not leviable on money changing per se, as such activity does not fall under the category of foreign exchange broking.

Mukunda

Chartered Accountant

28 Points Joined September 2008

Originally posted by :Mukunda

Hello All,
With recent amendment in the service tax, forex broking include money changers, therefore money changers are required to charge service tax on the consideration for services rendered, provided the consideration is charged seperately in the invoice, Otherwise money changes will have option to pay services tax @ .25% of Gross Currecny exchanged.
However my clinet would like to charge service tax on consideration charged in the invoice seperately instead of paying @ .25% of Gross currency exchanged, but the consideration charged in the invoice is fixed irrespective of amount of currency exchanged, accordingly his services tax liability does not varry with quantum of business as his consideration is fixed per transaction. Now my question is whether the trading margin(difference b/w buying and selling rate) to be considered or not for the purpose of taxable services. If yes on what ground?
Pls advise on this pls help me on this?

Can any body help on this?

Mukund

Mukunda

Chartered Accountant

28 Points Joined September 2008

Originally posted by :Mukunda
"	Hello All, With recent amendment in the service tax, forex broking include money changers, therefore money changers are required to charge service tax on the consideration for services rendered, provided the consideration is charged seperately in the invoice, Otherwise money changes will have option to pay services tax @ .25% of Gross Currecny exchanged. However my clinet would like to charge service tax on consideration charged in the invoice seperately instead of paying @ .25% of Gross currency exchanged, but the consideration charged in the invoice is fixed irrespective of amount of currency exchanged, accordingly his services tax liability does not varry with quantum of business as his consideration is fixed per transaction. Now my question is whether the trading margin(difference b/w buying and selling rate) to be considered or not for the purpose of taxable services. If yes on what ground? Pls advise on this Mukund	"

pls help me

Guest

428830 Points Joined August 2012

Dear All,

I just want to confirmt that the service tax rate levy on foreign enchasee .

service tax:-

education cess

senior education cess

pls help

Ankit Gangwal

25 Points Joined December 2007

Originally posted by :Mukunda
"	Hello All, With recent amendment in the service tax, forex broking include money changers, therefore money changers are required to charge service tax on the consideration for services rendered, provided the consideration is charged seperately in the invoice, Otherwise money changes will have option to pay services tax @ .25% of Gross Currecny exchanged. However my clinet would like to charge service tax on consideration charged in the invoice seperately instead of paying @ .25% of Gross currency exchanged, but the consideration charged in the invoice is fixed irrespective of amount of currency exchanged, accordingly his services tax liability does not varry with quantum of business as his consideration is fixed per transaction. Now my question is whether the trading margin(difference b/w buying and selling rate) to be considered or not for the purpose of taxable services. If yes on what ground? Pls advise on this Mukund	"