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BW Businessworld

A Blow To Funds Inflow

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Remitting money from abroad just became a tad more expensive. Blame it on the service tax notification on ‘place of provision of services' released last week. From 1 July this year, a service tax of 12.36 per cent will be charged on the fees paid for fund transfer.

The market for inward remittances by the NRI community is estimated at $65 billion.

Sachin Menon, partner at consulting firm KPMG, says the new tax rule works against the Reserve Bank of India's intent to attract foreign inflows.

One state that has been roiled is Kerala, which accounts for a significant amount of remittances. They number about 2.2 million a month, according to K.R. Bijimon, chief general manager at Muthoot Finance.

Assuming an average fee of Rs 100 per transaction, that is about Rs 1,000 crore a year.

That's one way of closing the budget deficit, but most remittance recipients would see it as a disservice tax.

Strictly Business
Air Finland has grounded operations and filed for bankruptcy. The Helsinki-based operator, founded in 2002, has cited high fuel prices and low utilisation levels as the reasons behind the grounding.

(This story was published in Businessworld Issue Dated 09-07-2012)