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TMI BlogFinancial SectorX X X X Extracts X X X X X X X X Extracts X X X X ..... . Also charges related to minimum balance requirements, use of Safe deposits lockers/vaults loan processing charges will be out of this entry. In case of remittance of money, it is clarified by The CBEC vide Circular no. 163/14/2012-ST, dated 10-7-2012 that remittance of money is transaction in money. The definition of service excludes transaction in money. In cases, fees or conversion charges are levied for sending such money from outside India, they are also not liable to service tax as the person sending the money and company conducting the remittance are located outside India. Therefore the place of provision of service will be outside India. It is further clarified that even the Indian counterpart bank or financial instit ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... actions. The definition of 'service' excludes activities that constitute only transactions in money or actionable claims. 'Money' has been defined in clause (33) of section 65B to include instruments like cheques, drafts, pay orders, promissory notes, letters of credit etc. Therefore activities that are only transactions in such instruments would be outside the definition of service. This would include transactions in Commercial Paper ('CP') and Certificate of Deposit ('CD') (on the understanding of being in the nature of promissory notes), issuance of drafts or letters of credit etc. Explanation 2 to clause (44) of section 65B has to be kept in mind which clarifies that transaction in mon ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... l in point no. 2.6.6 to 2.6.8. Transactions in instruments like interest rate swaps and foreign exchange swaps would be excluded from the definition of 'service' as such instruments are derivatives, being securities, based on contracts of difference. Since only transfer of title in securities is excluded from the definition of 'service' any attendant service charges or fees would be chargeable to service tax. Further services by way of extending deposits, loans or advances in so far as the consideration is represented by way of interest or discount. This has been explained in point nos. 14.2 to 14.4 below. 4.14.2 What are the services by way of extending deposits, loans or advances in so far as the consideration ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ns, advances or deposits are exempt in so far as the consideration is represented by way of interest or discount. Any charges or amounts collected over and above the interest or discount amounts would represent taxable consideration. 4.14.4 To what extent is invoice discounting or cheque discounting or any other similar form of discounting covered in the negative list entry? Such discounting is covered only to the extent consideration is represented by way of discount as such discounting is nothing else but a manner of extending a credit facility or a loan. 4.14.5 Would services provided by banks or authorized dealers of foreign exchange by way of sale of foreign exchange to general public be covered in this entry? No. This ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... and Certificate of Deposit ('CD') are understood as unsecured money market instruments issued in the form of a promissory note or in a dematerialized form through any of the depositories approved by and registered with SEBI. CPs are normally issued by highly rated companies, Primary Dealers and Financial Institutions at a discount to the face value. On the maturity date, the holder of CPs receives the income in the nature of discount or interest from the issuer. CDs can be issued by Scheduled Commercial Banks (excluding RRBs and Local Area Banks) and All - India Financial Institutions (FIs) permitted by RBI. Promissory note is included in the definition of money in the Act as given in clause (33) of section 65B . Thus both the ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ble to service tax. 4.14.9 Would 'future contracts' be chargeable to Service tax? Future contracts are similar to forward contracts. Main difference is that in future contracts, the underlying are stocks or index of stocks or certain approved currencies and the settlement happens only by way of net settlement with no actual delivery. Another difference is that future contracts are traded only on recognized stock exchange while forward contracts may also be traded over-the-counter. Since future contracts are in the nature of contracts of difference based on the prices of underlying stocks or index of stocks or approved currencies, they would be outside to the ambit of definition of 'service' as being transactions o ..... X X X X Extracts X X X X X X X X Extracts X X X X
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