Service Tax – Sub-brokers exempted – not a commission agent
In his Budget DO Letter, the JS, TRU clarified,
The present definition of a stockbroker [section 65(101)] includes sub-broker as well. A number of cases have been booked in the recent past where the sub-brokers have been asked to pay tax on the remuneration they receive from the stockbroker. Previously, the sub-brokers could issue contract note and receive amounts from the investors. With effect from 01.06.2005, SEBI regulations have prohibited sub-brokers from these activities. The role of sub-brokers has thus reduced substantially.
Considering that the entire broking charges are anyway taxable at the hands of stock-broker and a large number of small sub-brokers have to comply with the service tax laws, the sub-brokers have been excluded from the purview of service tax by making suitable amendment in the definition of stock-broker. It is also clarified that such sub-brokers should also not be charged to service tax as commission agents under Business Auxiliary Service . For this purposes, specific exemption notification would be issued at the appropriate time.
The appropriate time has come and the Government has exempted the taxable service provided by a sub-broker, to a stock-broker in relation to sale or purchase of securities listed on a registered stock exchange from the whole of the service tax leviable.
Notification No. : Dated 1st September, 2009.