Transfer of money through money orders, operation of savings account in post offices and purchase of postal orders would not attract any service tax, the Government has said.

This is because Department of Posts is not considered as a service provider similar to a bank or a financial institution and therefore such services provided by this department are not liable to service tax.

As per the existing legal provisions, banking and other financial services provided by a banking company or a financial institution or a non-banking financial company or any other service provider similar to a bank or a financial institution are liable to service tax.

The main issue before the Government was whether service tax on certain services such as money orders, operation of savings accounts, issue of postal orders, which are in the nature of banking and other financial services, provided by the Department of Posts would be liable to service tax or not.