Is the National Stock Exchange liable to pay service tax?
Where can you classify the services provided by NSE, BSE, MCX etc., Is it
1. Online information and database access retrieval service, or
2. Business Auxiliary service, or
3. Clubs and Associations
Board has clarified that
1. Not online Data: The activities of the Exchanges and their clearing houses cannot be simply, called the 'online information and database access retrieval service' or 'provision and transfer of information and data processing'. While it is true that the Exchanges/clearing houses do process, exchanges/transfer and provide online data during the course of their business, the same is (i) only incidental to ensure transaction of stocks/commodities and their settlement, and is not the principal service provided by the Exchanges and their clearing houses (ii) no separate charges are collected for information and data processing or access/retrieval by the Exchanges/clearing houses during the course of such trading. The transactions charges collected by the Exchanges are based on the quantum (in money value) of transaction in stock or commodity, as the case may be, and not on the volume of data interchanged/accessed retrieved.
2. Not BAS: These services do not fall under the business auxiliary service, as these are not performed on behalf of any other person.
3. Not a Club: These services would also not fall under the category of services provided by 'clubs and associations' as the Exchanges and clearing houses are corporate bodies which provide service to investor through a registered member as against to its own members.
But where?
Board has clarified that though the activities of the Exchanges/clearing houses are in the nature of 'services', they do not fall under the category of any of the existing taxable services.
However, if service of 'online information' is provided by exchange on payment basis to, say market reporting agency or any other person (i.e. television channels), the same is liable to service tax.
Board is shy of making such important decisions public. These are contained in a letter from the Board to the field.
Letter F. NO. -4, Dated 18-5-2007