Charging 12.36 % tax on NRIs remittances may promote Hawal business in India

November 10, 2014 09:28 AM
Service tax on NRIs remittances an new issue under attack

By Chanchal Manohar Singh

  Chandigarh, Nov. 9: PM Narendra Modi government has imposed 12.36 per cent as service tax on remittances from aboard sent by NRIs for supporting their families home back here. 

Punjab Congress on Sunday said the decision to charge service tax on remittances was a "grave injustice" to NRIs. The congress also questioned chief minister Parkash Singh Badal's "silence" over such an important issue that concerns lakhs of families in Punjab.
"The NDA government led by PM Narendra Modi this year started charging a service tax of to the tune of 12.36 per cent on foreign remittances fee which is a grave injustice to NRIs," former Punjab chief minister Rajinder Kaur Bhattal said here.
Bhattal said in Union Budget 2012 there was a proposal to tax the NRI remittances fee and Badal had opposed the idea by writing to the then Prime Minister.  However, later in July 2012, UPA government issued a clarification that there would be no service tax on NRI remittances fee, she said.
However, the Modi government through a circular dated October 14, 2014, cancelled the old circular and service tax on foreign remittances is now charged at 12.36 per cent, she claimed.
Bhattal questioned Badal's "silence" on the issue. "NDA is forcing Badal to keep quiet and tolerate the injustice to NRI families and the NRIs," she said.
Bhattal warned the central government that the decision will give jump to illegal chanels NRIs plans to remit money to India as the additional transaction cost will drive them towards hawala channel or to invest in countries other than India.
A majority of Punjabis send money from Europian countires and northe American countries to their families here, she said, adding they send remittances on regular intervals to sustain the senior and old parents and other members of the families back home.
"Now after the burden of such a huge service tax of 12.32 percent levy, an additional cost, many of them may thing some other ways to make things reach their parents, relatives and families living in Punjab."  Bhattal pointed out.

Money transfer from abroad to be charged 12. 36 per cent 

MUMBAI (TOI): The Centre on Tuesday decided to garner revenue by indirectly levying service tax on NRI remittances, a move that will eat into the earnings of lakhs of NRIs who regularly send money back home.

In a circular issued by the Central Board of Excise and Customs (CBEC), the government said banks and financial institutions which levy a fee or commission for facilitating the transfer of money from abroad will have to pay service tax.

The circular effectively revises the government decision of 2012 to not levy service tax on NRI remittances.

The circular issued late on Tuesday night by Dr Abhishek Chandra Gupta, technical officer of CBEC, said that banks and financial institutions fall under the
category of intermediary as defined in rule 2 (F) of the Place of Provision of Service Rules 2012.

Sachin Menon, chief operating officer, tax and regulatory services, KPMG, said the circular was "completely unfair" to NRIs who send remittances to the country.

"No service provider pays service tax from his pocket," Menon said.

Menon said the move was akin to "picking the pockets of labourers and maidservants" who work abroad.

"Assuming that Rs10 is the additional cost [transaction fee charged by money transfer agent] of every Rs 100 that an NRI sends, now only Rs 98.76 will be received for every Rs100 sent [after reducing 12.36% service tax on Rs10]," Menon said.

Critics also said the move might result in a rise in anti-national activities, with money remitted through hawala as an alternative.

Emerging as the top recipient of money from abroad among developing nations, the country received remittances of $64 billion in 2011, according to World Bank data.

Chief ministers of Punjab and Kerala, states that get the largest remittances, had taken up the matter with prime minister Manmohan Singh when the tax was previously mooted, and the circular was withdrawn in 2012. (Times of India)

Have something to say? Post your comment