Date of charging of commission/brokerage for the purpose of payment of service tax-reg... - Service Tax - 14/08/96

Service tax - Date of charging of commission/brokerage for the purpose of payment of service tax-reg... SERVICE TAX CIRCULAR NO 14/8/96 DATED - 30-09-1996 A doubt has been expressed by the field formation regarding the date on which commission/brokerage gets charged i.e. whether at the time of entering into contract or at the time of raising the bills for the purpose of payment of service tax. A further doubt has been raised relating to disputes transactions (where the investor withdraws from the transactions and does not pay for the shares purchases by stock broker for him) as to whether the service tax has to be charged on these transactions. The matter has been considered by the Board. Section 67 of Finance Act, 1994, provides. inter-alia, that the value of taxable service in relation to a stockbroker shall be the aggregate of the commission or brokerage charged by him on the sale of purchase of securities from the investor and includes the commission or brokerage paid by the stockbroker to any sub-broker. Board is of the view that the service tax is to be collected on the commission/brokerage charged by the stockbroker at the time of raising the bill. Care may be taken to ensure that for each transaction, a separate bill is raised or in case of a netted bill, all transactions are shown separately on the bill and service tax is charged on each transaction. In case of an incomplete transaction, no brokerage or commission is charged by the stockbroker and therefore, the value of taxable service in such cases would be nil. In that case, the stockbroker is not required to collect any service tax or pay any service tax to the Government. What is intended is that where any brokerage or commission is collected by a stockbroker, the stockbroker is liable to collect service tax and pay the same to the Government. Needless to say, the scheme of collecting of Service Tax is such that implementation of its provisions should be smooth and not involve too much procedural formalities to be complied with by the assessee. The procedure should be as simple as possible so as to achieve the confidence of the assesses.