SERVICE-TAX ON NSE/BSE/MCX/NCDEX/NSCCL/BIOSL/CCIL - Service Tax - Letter F. no. 137/ 57/2006-cx-4

SERVICE-TAXON NSE/BSE/MCX/NCDEX/NSCCL/BIOSL/CCIL Letter F. no. 137/ 57/2006-cx-4, dated 18-5-2007 Please refer to your letters F. No.171/ dgcei/st/int/57/2006, dated 16-11-2006, F. No. 171/DGCEI/MZU/1 and ISD/12(1)/37/5, dated 29-9-2006 F. NO. 171/dgcei/st/int/83/2005, dated 11-10-2006, F. no. 171/dgcei/st/int/47/2006, dated 25-11-2006 on the above subject . 2. the stock exchanges like National Stock Exchanges (NSE)/Bombay Stock Exchanges (BSE) provide electronic, platform and other related services to facilitate and carry on trading shares, stocks, debentures, bonds and commodity etc. and to initiate, facilitate, promote, assist, undertake manage all activities in relation to trading in securities, other instruments and commodities. The clearing houses associated with these exchanges, i.e. National Securities Clearing Corporation Limited (NSCCL) and M/s Bank of India Shareholding (BOIsl) provide service of clearing and settlement of stocks, which includes validating the transactions; keeping account of buying and selling of stock; maintaining payment details against buying and selling; debiting and crediting the customer's accounts and providing guarantees to the parties (i.e. brokers or investors) settlement of transaction. in case of trade in government securities, treasury bill, guaranteed securities, bonds, units, deposits, certificates, notes, warrants and other securities of all kind on Negotiated Dealing System (NDS), the electronic platform of RBI, clearing and settlement is done by Clearing Corporation of India Ltd. (CCIL). Similarly, National Commodities Derivatives Exchanges (NCDEX) and Multi Commodity Exchanges of India (MCX) provide electronic platform and other related services for trading in commodities. Further, commodity exchanges are also providing services of clearing and settlement of trade executed through them. 3. The Board has examined the issue of leviability of service tax on services provided by the Stock and Commodity Exchanges and corresponding Clearing and Settlement organizations, under the category of 'provision and transfer of information and data processing (under Banking and other Financial Services)', 'Business auxiliary services on-line information and database access or retrieval services' and 'club and association service'. 4. the Board is of the view that the activities of the Exchanges and their clearing houses as mentioned above 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. Similarly, these services do not fall under the business auxiliary service, as these are not performed on behalf of any other person. 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. Thus, though the above stated activities of the Exchanges/clearing houses are in the nature of 'services', they do not fall under he category of any of the existing taxable services. 5. 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. 6. The pending issue may be decided on the aforesaid basis.