No Service Tax To Be Implemented On NRI Remittances: Government

The clarification follows concerns over reports that there was a move to levy 12% tax on money sent back home by Indians abroad from July 1.

NEW DELHI: The government has said overseas remittances will not attract service tax, putting to rest the concerns raised in view of new service tax norms.

"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," said a circular issued by the Central Board of Excise and Customs.

The clarification come in the backdrop of concerns expressed in several quarters that overseas remittances would face 12% service tax under the negative list regime applicable from July 1.

India, one of the top recipient of remittances, got $ 64 billion in 2011, according to the World Bank data.

Chief Ministers of Punjab and Kerala, which are among the states receiving the largest remittances from expatriates, had taken up the matter with Prime Minister Manmohan Singh.

"Concerns have been expressed in various fora regarding the leviability of service tax on the remittance of foreign currency in India from overseas. Remittance comprises money, the activity does not comprise a 'service' and thus not subjected to service tax", it said.

In case any fee or conversion charges are levied for sending such money, they are also not liable to service tax as the person sending the money and the company conducting the remittance are located outside India, the circular issued by the apex indirect taxes body said.

The CBEC further clarified that Indian bank or financial institution which charge the foreign bank for the services provided at the receiving end, is not liable to service tax.

"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.

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