With effect from October 1, 2014 , the government has imposed a service tax of 12.36% on the foreign exchange earned by agents of overseas principals/intermediaries in India. Agents or intermediaries earn valuable foreign exchange for the country by way of providing market information on Indian business scenario to the foreign supplier, thus enabling discovery of the best price and setting of favourable terms for the Indian buyer .The recipient of such services are the overseas supplier, who pay a commission at the end of a successful transaction. Often a lot of market research is done, sometimes, over a full year, before even one successful transaction is made. Sometimes no business is concluded for various factors like forex fluctuation, non-viability of prices, changing external scenario even though the agent in India has been putting efforts in terms of time and money. Since there is no way to recover this 12.36 % from the overseas Principals nor are they liable to pay the local Indian tax, with the proposed regime of 27% GST, no agent can afford to pay this service tax which will compound their woes of an already existing 33% income tax. By imposing a service tax on the foreign exchange earnings of the Indian agents, the government would render many medium and small agents out-of-business. The government should take a serious note of this and grant exemption of this service tax to the exporters of services earning valuable foreign exchange for the country rather than stymieing its growth.
Abdul Matin via email
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