Service Tax on Commodity Market – Board Clarifies

By Vijay Kumar

In a letter to the Director, Forward Market Commission, the CBEC has clarified that:-

1. Commodity exchanges have been specifically brought under service tax net w.e.f. 16.5.2008.

2. The value of taxable service provided by the commodity exchanges shall include all charges levied on account of the services rendered (like transaction charges, annual subscription charges, processing charges and VSAT line charges).

3. Therefore, unless broker charges service tax on gross amount, the CENVAT chain would break.

4. Accordingly, w.e.f. 16.05.2008, this issue raised is not relevant in view of the fact that the Investor is liable to pay service tax on all charges, including any charges levied by exchange.

5. As regards earlier period, it is matter of fact as to whether the broker acted as a pure agent or not.

6. In this regard the illustrations given in the Service Tax (Determination of Value) Rules, 2006 may also be seen.

CBEC F.No.137/14/2008- CX -4 Dated: August 5th, 2008