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Issue of equity shares at premium whether exempted service? (whether this activity is 'trading in securities'), Service Tax |
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Issue of equity shares at premium whether exempted service? (whether this activity is 'trading in securities') |
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Dear exeprts We are manufacturer and public limited company. recently we have gone through excise audit. We have securities premium account where premium received on issue of equity share is credited. i.e. for eg. if the face value of shares is ₹ 10 and if we issue to shareholder at ₹ 15, ₹ 5 is the premium received and credited to securities premium account. Now auditors view is that, this is exempted service (trading in securities) and they are asking us to reverse the CENVAT credit according to CCR 6 (3). Please let me know the legal position and your view in this matter. Posts / Replies Showing Replies 1 to 5 of 5 Records Page: 1
Sir, Please inform what are the common input services you are using? Since trading in securities is in the negative list you are not liable to pay service tax on trading. Since no credit of service tax paid on input services is availed by you there is no question of reversing any cenvat credit taken.
By issuing shares you have not provided any service. in fact it is trading I.e. buying and selling of shares where no service tax is involved by any means. Hence no question of reversing the input credit.
The trading of securities is an exempted service. The company is a manufacturer. In such a situation the company has to maintain separate accounts for exempted service and also other aspects. The auditor may ask the company to reverse the credit if the company may not maintain separate accounts for exempted services as per Rule 6. Further Rule 6 (3) provides that if the manufacturer does not opt to maintain separate accounts shall pay 7% of the value of exempted services.
Dear Sir We are not in business of trading in securities. Trading means buying and selling. In our case the share premium is collected by issue of new shares at the premium either to the existing shareholders on right basis or to the promoter on preferential basis and there was no purchase and sale of securities involved Hence it will not treated as a trading in securities
Mr.Yatin Bhopi In either way you are not liable for service tax. Hope it is clear.
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