No service tax on foreign remittances: Indian Govt

New Delhi: The Indian government said Tuesday that remittances sent from overseas will not be liable for service tax charge, putting to rest the confusion that had arisen after the presentation of union budget for 2012-13 in March.

“The matter has been examined and it is clarified that there is no service tax per se on the amount of foreign currency remitted to India from overseas,” the Central Board of Excise and Customs (CBEC) said in a circular.

The circular clarified that remittance does not comprise a “service” and thus not subjected to service tax.

The clarification will be a major breather for the millions of Indian Diaspora living abroad, especially those working in the Gulf countries, who are the major source of remittance to India.

A confusion related to the service tax on remittances was created after the then Finance Minister Pranab Mukherjee in the union budget for 2012-13 presented in March this year proposed to levy tax on all services except those in the negative list.

Various organisations and political parties had asked the central government not to levy any such tax on remittance.

The CBEC further clarified that any fee or conversion charges levied for sending remittances are also not liable to service tax as the person sending the money and the company conducting the remittance are located outside India.

“Such services are deemed to be provided outside India and thus not liable to service tax,” it said.

“Even the Indian counterpart bank or financial institution who charges the foreign bank or any other entity for the services provided at the receiving end, is not liable to service tax as the place of provision of such service shall be the location of the recipient of the service, i.e. outside India,” it added.