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FINANCIAL SERVICES UNDER NEGATIVE LIST

Service Tax - By: - Dr. Sanjiv Agarwal - Dated:- 6-11-2015 - Clause N of 66D of Finance Act, 1994 provides for the following entry in Negative List - Services by way of- (i) extending deposits, loans or advances in so far as the consideration is represented by way of interest or discount; (ii) inter se sale or purchase of foreign currency amongst banks or authorised dealers of foreign exchange or amongst banks and such dealers; The above mentioned two specified services have been included in neg .....

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rvice charge, fee or other charge, by whatever name called. For example, processing charges, pre-payment fee, late fee, cheque bounce charges etc. will not be called interest. Also such interest has to be paid or received in relation to - Money borrowed Debt incurred Deposit Claim or other similar right or obligation However, in section 2(28A) of Income Tax Act, 1961, the expression interest has been defined to mean interest payable in any manner in respect of any money borrowed or debt incurred .....

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Exchange Management Act, 1999. Authorised dealer of foreign exchange has been defined to have the meaning under section 2(c) of Foreign Exchange management Act, who deals in foreign exchange of carry out certain transaction in foreign exchange. The authorised dealer should be a person authorised by Reserve Bank of India and must have obtained a license to deal in foreign exchange. Authorised dealer may be a person or a firm or a juristic person. Authorised person means an authorized dealer, mon .....

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t or allowed to be used or retained on payment of what is commonly called the time value of money which could be in the form of an interest or a discount. This entry would not cover investments by way of equity or any other manner where the investor is entitled to a share of profit. Illustrations of negative services could be as follows - Fixed deposits or saving deposits or any other such deposits in a bank for which return is received by way of interest. Providing a loan or over draft facility .....

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Any charges or amounts collected over and above the interest or discount amounts would represent taxable consideration. Invoice (Bills) discounting or cheque discounting or any similar form of discounting is covered only to the extent consideration is represented by way of discount as such discounting is nothing else but a manner of extending a credit facility or a loan. Services provided by banks or authorized dealers of foreign exchange by way of sale of foreign exchange to general public will .....

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