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14 Feb 2014

No Service Tax on Services provided by sub-broker in relation to Forward Contracts - from 10.09.2004 to 30.06.2012

In Negative List regime, services provided by sub-broker or an authorised person to stock broker falls under point 29(a) of Mega Exemption Notification and under point 29(b) of the ibid in respect of services provided by authorised person to a member of commodity exchange. Similar exemption was also available in Positive List regime under Business Auxiliary Service in relation to sale and purchase of securities listed on a recognised stock exchange (Notification No. 31/2009-ST dated 01.09.2009)./p>

However, no such specific exemption was available to sub-brokers dealing in forward contracts (commodity exchange). Though the taxability has explicitly been defined after the institution of Negative List approach, prior to Introduction of Negative List there was common practice not to charge service tax on services provided by sub-broker to member of recognised association or a registered association in relation to forward contracts. Industry had opted this view because Forward Contract Service only covers services provided by a member of a recognized association or a registered association which otherwise would have been defined under Business Auxiliary Service./p>

Recently, the Central Government vide Notification No. 03/2014-ST dated February 3, 2014 by exercising its powers conferred by Section 11C of the Central Excise Act, 1944 read with Section 83 of the Finance Act has directed that service tax payable on the services provided by an authorised person or sub-broker to the member of a recognised association or a registered association, in relation to a forward contract, shall not be required to be paid in respect of such taxable service on which the service tax was not being levied during the period commencing from the 10th day of September 2004 and ending with the 30th day of June 2012./p>

Here, we would also like to mention that service providers, who has paid service tax on services mentioned supra, may file refund claim, adhering to provisions contained in Section 11B(2) of the Central Excise Act, 1994, within six months from the date of issue of notification i.e. February 3, 2014. {Section 11C(2) of the Central Excise Act, 1994}