Three months after the Indian government’s decision to levy a service tax on remittance fees, there is still confusion among non-resident Indians (NRIs) and money transfer service operators
(MTSOs) in the UAE. According to the Central Board of Excise and Customs, Indian banks acting as agents to international MTSOs can charge a 12.36 per cent tax on their commission or fees for all foreign currency remittance transactions to India. But without a date or details, the board’s circular has created anxious questions and ambiguous answers centred around two issues.
One is of when the tax will come into effect. The second and perhaps more important: who will bear this burden — the sender, receiver, UAE exchange house, or Indian bank?
The UAE’s MTSOs have provided widely differing responses: they will not pass this tax to their customers; they will only do so sometime in the future; or that it will be shared between them and their Indian agents. Meanwhile, the Indian Embassy in the UAE has said it is still awaiting clarifications from the Indian government.
Despite the confusion, there is also much consternation and concern among Indian residents in the UAE. It is widely assumed that when the 12.36 per cent tax comes into effect, it is the sender or the receiver who will have to bear the brunt of it — either through incurring extra costs on every transaction, or a loss during its receipt. This will particularly affect low-income Indian expatriates in the UAE and across the GCC, which is home to millions of migrant workers.
Lower-income worries
Arif Mohammad Rangari, a property manager based in Dubai, says, “The value of Rs21 (Dh1.24) is only understood by the people whose monthly income does not exceed Rs11,900. It is an extra amount they will have to pay every time they send their hard-earned money home. I was more upset for these people when I heard of the tax, than for my friends, family, or myself.
“Our new government does not seem to consider how this will affect the lives of NRI workers in low-income categories such as labourers, cleaners, house maids and drivers. They do lowly and menial jobs and endure terrible working and living conditions for many years just to support their families back home.
“At home, their families desperately need every bit of this remittance money for their daily lives,” Rangari says, explaining the reasons why he feels the tax is unfair.
According to a recent white paper commissioned by Friends Provident International (FPI) that was published by the Economist Intelligence Unit (EIU), more than 80 per cent of Indians in the UAE have between two and five dependents to support, and much of the money they remit is used for family support.
Shanawaz Ansari, a security guard who has been employed for five years at one of the UAE’s largest facilities maintenance firms, gives credence to this claim. “I send money every month to my mother and sisters in Jagatdal, West Bengal, because they depend on me. My salary is needed at home,” he says. Ansari coincidentally uses a branch of Al Ansari Exchange at Al Khail Mall for remittances, and is now worried that he may have to look for other options if the tax comes into effect.
“The Congress government was interested in poor people, but the BJP government is only interested in the rich. If they do this, it will be a monthly loss for us,” he declares.
Annapurna V of Andhra Pradesh is a housemaid employed with a cleaning service agency and, since she cannot read English, constantly asks the households where she works for updates on what she has heard — that she will soon need to start paying more to send her money to India. In Annapurna’s case, she remits money to two sets of families in two locations — Mallikapuram and Mannepalli. “I will have double trouble, more than anyone else, because my parents live in one place, and my daughter and husband in another.”
Annapurna says she is thankful to the staff of LuLu Exchange who have visited her quarters in Sharjah over the past few years, and assisted her and her colleagues in remitting their hard-earned money home. But she is concerned that a recent relocation of these quarters and the new tax will diminish both her ability and capacity to be the principal breadwinner for her family.
Contradicting policies
Rangari points out that while the new tax is unfair on blue-collar and low-paid workers in the UAE, it will also pose problems for NRIs in higher income groups, especially those who remit money to different locations, or multiple times in a month. He cites himself as an example, with the recent purchase of two apartments in Mumbai, both payable in staggered instalments. “It is our hard work, our money, our investment, our decision, and we already pay transfer fees on transactions. India is not a poor country any more, so what is the need of this new tax?”
India has always been a land of ironic contradictions, and this new development confirms this fact, say other residents. The Indian government provides so many incentives to wealthy exporters in order to promote inward foreign currency remittance — cash incentives, tax refunds and duty-free facilities, among others. On the other hand, the government now wants to tax poor workers just for sending their money home to needy family members, says Saby Sebastian of Sharjah, a retired teacher who is committed to social causes on behalf of Indian workers.
“In another parallel, NRI remittances have been higher than foreign direct investment in India for many years, but the Narendra Modi government seems to have forgotten this. This new proposal to tax NRI remittances is not only illogical, it is greed. It may not affect all of us, but we must consider the plight of other Indians who live alongside us,” she says. “For them, this is injustice.”
Meanwhile, more than 60 firms engaged in money exchange and remittances in the UAE have recently formalised an industry association under the aegis of the Foreign Exchange and Remittance Group. Y Sudhir Kumar Shetty, the organisation’s Vice-Chairman who is also the Chief Operating Officer of UAE Exchange, recently said the group has formally requested the Indian Government to abolish the remittance tax.
