News

Banks may not have to pay service tax for facilitating international trade

Banks may not have to pay service tax for facilitating international trade

Indian banks will not have to pay goods and services tax (GST) on reverse charge mechanism for facilitating trade for exporters or importers through foreign banks, if a recent ruling by an appellate tribunal is to go by.

In a Rs 110-crore relief to State Bank of Bikaner & Jaipur (SBBJ), now merged with State Bank of India, the Delhi Customs, Excise Service Tax Appellate Tribunal (CESTAT) has ruled that the bank is not liable to pay the erstwhile service tax on a reverse charge mechanism. This is because it was not the recipient of any service rendered by the foreign bank and no consideration was paid by it.


The case may act as a precedent for other service tax and GST cases, where banks may been held liable to pay tax on reverse charge for merely being facilitators for exporters or importers.

To facilitate trade, Indian banks provide services to exporters by sending the export documents to the bank of the importer abroad and collect payment

Top