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Transaction amounting to taxable service subject to service tax - Service Tax - 20/14/96Extract This Circular has been rescinded by Circular No. 93/4/2007-ST, Dated: May 10, 2007 Service Tax Transaction amounting to taxable service subject to service tax Service Tax Circular No. 20/14/96, dated 31-12-1996 The Trade is hereby informed that certain doubts whether the following transactions amount to taxable service subject to service tax have been raised for clarification from the Board :- (A) Jobbing - Transactions entered on principal to principal basis between member brokers of the same stock exchange. (B) Own Trading - Transactions entered on their own account by the brokers. (C) Arbitrage - Transactions entered into by two brokers of different stock exchange in order to profit from price difference between two markets. 2. The matter has been examined by the Board in consultation with other field formations. As per Section 65 (6) of Finance Act, 1994, taxable service means any service provided to an investor by a stock broker in connection with the sale or purchase of securities listed at recognised stock exchange. In view of this definition, the points raised above are clarified below:- (a) When the transaction is on principal to principal basis between brokers, no investor is involved and as such no taxable service is provided and therefore, no service tax is chargeable. (b) Where a broker enters into a transaction on his own account with an investor who is a non-member of the stock exchange the service provided will be taxable service and subject to service tax. (c) In case of arbitrage transaction i.e. the transaction between two brokers of different stock exchanges, the service is provided by a broker i.e. the member of a stock exchange to a non-member of that stock exchange even though the investor may be a member of another stock exchange. Their being an investor involved in the transaction, the service so provided to the investor will be a taxable service subject to service tax. 3. Trade and field formations may be advised accordingly.
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