Service Tax on commission received by banks against Government Business
While auditing a Bank it was noticed that the Bank was not paying service tax on the amount of commission received from RBI for doing government related business transaction e.g. disbursement of pensions, maintenance of PPF account etc. Notification No. 13/2004-ST dated 10.09.2004 as amended by notification No. 19/2006-ST dated 24.04.2006 exempts from service tax, banking company or financial institution providing service in relation to collection of duties or taxes levied by government.
The said commission is not earned towards ‘collection of duties and taxes' levied by the government.
So Board clarifies that service tax is payable on such commission received by the bank from RBI.
The service tax amounting to Rs.52 lakhs has been recovered from the said branch of the bank.
Similar issue has been noticed in other banks also and may be prevalent in case of other banks and Board wants the issue to be noticed by the field for initiating action to recover Service Tax.
CBEC's F. No. 137/26/2007- CX.4 Dated: 5th December, 2008