Circular No. 180/06/2014
Government of India
Ministry of Finance
Department of Revenue
Central Board of Excise
Tax Research Unit
Room No 153, North
Block, New Delhi
Dated 14th October,
Chief Commissioner of Customs and Central Excise
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
Commissioner of Service Tax (All)
Subject: – Levy of service tax on
activities involved in relation to inward remittances from abroad to
beneficiaries in India through MTSOs- reg.
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.
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’.
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.
issues discussed above have been examined and it is clarified as follows,-
Whether service tax is payable on
No service tax is payable per
Whether the service of an agent or
Yes. The Indian bank or other
Whether service tax is leviable on
Service provided by an
The value of intermediary service
Whether service tax would apply on
Yes. As the service is provided by
Whether service tax would apply on
Any activity of money changing
Whether services provided by
Sub-agents also fall in the
Circular No. 163/14/2012-ST, dated 10.7.2012 stands superceded.
Notice/Public Notice may be issued accordingly.
acknowledge the receipt of this circular. Hindi version to follow.
Abhishek Chandra Gupta)
Technical Officer, TRU
Tel: 011-2309 2037