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Service Tax Circular
No. 92/3/2007-ST dated 12.3.2007
Liability of 'money changers' to pay service tax under 'banking and other
financial service' – reg.
Service tax is leviable on foreign exchange (forex) broking
service under the category of ‘banking and other financial service’. In terms of
the provisions of the Finance Act, 1994, foreign exchange broker includes a
money changer (authorized dealer of foreign exchange). In this context, a
question has arisen as to whether the service provided by a money changer in
relation to exchange of foreign currency is a forex broking service for
applicability of service tax levy under ‘banking and other financial services’.
2. The issue has been examined by the Board. It was noted that ‘money changing’
and ‘foreign exchange broking’ are two distinct activities. Money changing is an
activity of sale and purchase of foreign exchange at the prevalent market rates.
On the other hand, foreign exchange broking is the activity performed as an
intermediary, on a commission/brokerage basis, for facilitating the clients who
wish to buy or sell foreign exchange. The foreign exchange broker providing
foreign exchange broking service does not hold title to the foreign exchange.
Accordingly, Board is of the view that service tax is not leviable on money
changing per se, as such activity does not fall under the category of foreign
exchange broking.
3. The instruction issued earlier vide letter F. No. 341/44/2005-TRU, dated
6.10.2005 stands superceded.
4. Trade and field formations may be advised accordingly.
5. Hindi version will follow.(Gautam Bhattacharya)
Commissioner (Service Tax)
F. No. 249/3/2007-CX.4