ONE OF MY CLIENT IS STARTING THE MONEY CHANGING BUSINESS i.e purchase and sale of foreign exchange, now for every transaction he is going to charge the service charges of RS. 25 per transaction. now i would like to know when is service tax applicable
when, 1) the total of Rs 25 collected crosses the limit of service tax applicability or, 2) The total of turnover of sale crossess the limit of service tax applicability or, 3) any other way.
plz explain me in detail, if u want any further clarification plz let me know and help me to resolve the question.
08 December 2009
For Foreign exchange service, the service tax is 0.25% of sale or 0.25% of purchase. Then you do not have to show separate commission being charged. However, if you opt for this scheme then you cannot claim set off of service taxes you may have paid down the line. If you sell USD 1000 @ 47 then you pay service tax on Rs.47,000. If you purchase it at 46 then you pay Service Tax on Rs.46,000. no set off is available. therefore you build in your commission and service tax in the rates.
13 December 2009
For this particular service, the tax is on the service element of money changing. However, Govt. has notified that in case you do not show service amount separately, you pay 0.25% of Transaction amount as service tax. You cannot claim any input credit in such case. You have to be a licenced money changer to do this business. Obviously your turnover will be over 10 lakhs per annum in buying and selling foreign currency to the public.
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