RCM ON FOREIGN BANK CHARGES, Goods and Services Tax - GST

[NILESH PITALE]

Dear Expert - Observation raised by GST Officer During The Audit

My Client is exporter, Importer & Local Trader

Observation : NON-PAYMENT OF RCM ON FOREIGN BANK CHARGES: During the course of Audit, I.t i's seen that foreign bank have deducted the bank charges against receipt of`foreign currency. The banks are deducting charges for remittance of money. The locati.on of tlie suppli.er I e. Bank is ouitside lndi.a and location of the recipient is in liidia (taxable territory). from the data pi`ovi.ded. it is `eeii tliat a certain amount of charges are shown as sliort receipt whi'cli are actuall} the Ballk Charges of the foreign Bank. The Servlce provided by foreign bank for remlttalice ot` expoi.t proceeds is liable to GST as per Notification No. 10/2017-Integrated Tax (Rate), dated 27.06 2017, which stipiilates that any service supplied by any person who is located in a non-taxable territory to any person located in a non-taxable territory, the person located in the taxable territory will be paid on reverse charge basis by the recipient of such services---------------- is it RCM Applicable Please Guide

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[KASTURI SETHI]

The  same issue is pending with the Supreme Court in the case of State Bank of Bikaner & Jaipur, Alwar (Rajasthan). The Commissioner confirmed the demand and CESTAT set aside Order-in-Original and now the department has filed Civil Appeal with the Supreme Court. 

Banking and Other Financial Services — Indian bank facilitating settlement of payment between exporters and their buyers abroad, sending export documents to foreign banks of such buyers and collecting payments, whether liable to pay Service Tax on charges collected by such foreign banks from exporters ?

The Supreme Court Bench comprising Hon’ble Ms. Justice Bela M. Trivedi and Hon’ble Mr. Justice Pamidighantam Sri Narasimha on 7-11-2023 admitted in the Civil Appeal No. 2713 of 2021 filed by Commissioner of Central Excise and Service Tax, Alwar against the CESTAT Final Order No. 50737/2020, dated 5-8-2020 as reported in 2021 (45) G.S.T.L. 293 (Tri. - Del.) (State Bank of Bikaner and Jaipur v. Commissioner).

The Appellate Tribunal in its impugned order had held that the Indian bank facilitating settlement of payment between exporters and their buyers abroad, sending the export documents to the foreign based bank of such buyer and collecting payments, are not liable to pay Service Tax under Reverse Charge Mechanism on charges collected by such foreign banks for their activities and deducted at source in the export bill particularly when it is neither the recipient of any service from the said foreign bank nor had paid any consideration to it and had already paid Service Tax on commission/fee received from the exporters for providing aforesaid services.

[Commissioner v. State Bank of Bikaner and Jaipur - 2024 (80) G.S.T.L. J43 (S.C.)]