Service Tax on Transaction charges of NSE, SEBI fees, DEMAT charges, Stamp Duty - CBEC Clarifies
THE Chief Commissioner, Ahmedabad had requested the Board to issue a clarification. His Commissioner, Service Tax holds a view that the amounts collected as NSE/BSE/NSDL/CSDL charges being liability of the Broker / Sub Broker need to be included in the value of service. The Security Transaction Tax and Duty being the liability of the buyer/seller of the security are not includible in the taxable value and he had issued several high value Show Cause Notices.
Board has now given a clarification after considering the views from DGST and Commissioners of Service Tax and agreeing with the Ahmedabad Service Tax Commissioner. Board states," Turnover charges, NSE/BSE/NSDL/CSDL transaction charges, DEMAT charges and SEBI fees that are recovered by the brokers from their clients are found to be includible in the taxable value for payment of service tax. The Security Transaction Tax (STT) and Stamp duty are not includible in the taxable value for charging service tax .”
Board further clarifies," Since the Stamp duty and Security Transaction Tax, are the liability of the buyer/seller of securities and the broker pays the same acting as a Pure Agent the same are not includible in the taxable amount in terms of Rule 5(2) of the Service Tax (Determination of Value) Rules, 2006. All other charges by whatever name called recovered by the broker from the buyer/seller of securities are includible in the taxable value in terms of Rule 5(1) of the Service Tax (Determination of Value) Rules, 2006 ."
Board's conclusion is,"in case the expense is the liability of the service provider it has to be included in the taxable value. In case it is the liability of the service receiver and the service provider pays the same acting as a pure agent then such amount is not includible in the taxable value .”
As usual such important questions of law are clarified by the Board through a letter to the Chief Commissioner and a copy to DG, Service Tax with a request to communicate it to the world.
CBEC Letter in F. No.187/107/2010-CX.4: Dated 17 September 2010.