"Foreign Exchange Broker" includes any authorised dealer of foreign exchange, [Section 65 (46)].

Indian Service Tax

Foreign Exchange Broker's Service

N.B.: See also "Banking & Other Financial Services".

Effective date: 1/7/2003.

Authority: Notification No. 7/2003-ST, dt. 20/6/2003 (For full text see under "Business Auxiliary Service").

Rate of Service Tax: 8% upto 9/9/2004. 10% from 10/9/2004 - Cess 2% of 10% = 0.2. Total ST = 10.2%.

Definitions

"Authorised Dealer of Foreign Exchange" has the meaning assigned to "authorizedperson" in clause (c) of Section 2 of the Foreign Exchange Management Act, 1999 (42 of 1999), [Section 65 (8)]

"Foreign Exchange Broker" includes any authorised dealer of foreign exchange, [Section 65 (46)].

Taxable Service: Services rendered to a customer by a foreign exchange broker relating to Forex Services. Brokers in relation to banking and financial services are excluded from this service.

Value of Taxable Service: Gross amount charged for providing such service.

Person liable to pay: Any person or firm providing such forex services

Main text of Department Circular/Trade Notice

[Part of Para 1 of Cir.No. 59/8/2003, dt. 20-6-2003]

Foreign exchange broking service provided by any body corporate or non-banking financial company was covered under the tax net in the category of banking and other financial service with effect from 16/7/2001. Provisions have been made to extend the scope of the tax to include the service provided by all foreign exchange brokers (including moneychangers and forex dealers).

[Para No.4 of Cir.No. 62/11/2003-ST, dt. 21-8-2003]

Cir.No. 62/11/2003-ST, Date: 21/8/2003

4. Foreign exchange broking:

4.1 With regard to services provided by money changers, a doubt has been raised whether all trading in foreign exchange will be chargeable to service tax.

4.2 Prior to 1/7/2003 the service of "securities and foreign exchange (forex) broking", when provided by banking company/financial institution/body corporate was liable to service tax. Through Finance Act, 2003 "foreign exchange broking" when provided by foreign exchange brokers, other than banking company/financial institution/body corporate, were also brought under the tax net w.e.f 1/7/2003. As per the definition in law foreign exchange brokers include authorized dealers of foreign exchange. Authorised dealer of foreign exchange has been assigned the meaning of "authorized person" under the FEMA,1999.Accordingly authorized dealers/money changer etc. which are authorized to deal in foreign exchange are covered in the definition of "foreign exchange brokers" under service tax provisions. However, as explained above only the service of "foreign exchange broking" when provided by foreign exchange brokers (other than banking company/financial institution/body corporate which are already covered) has been brought under the tax net.