11 March 2010
One of my client (a pvt. Ltd. co) has entered into a Memorandum of Understanding (MOU) with a sub-broker (registered with SEBI) in the year 2006.
The Pvt. Ltd had good connection with clienteles dealing in shares and securities. The Pvt. Ltd. has employed staff to facilitate the broking activities and is holding all the assets namely office premises, computer systems, UPS systems, telephone lines and other movable assets in its name.
The sub-broker is having a remmisorship with a main broker and is duly registed with SEBI.
The understanding between both the parties is that the subbroker will open the accounts of the clients of the Pvt. Ltd under his remmiser code and provide the services of buying and selling of shares, F& O etc. In providing such services to the clients, the sub-broker will utilise the existing facilites of the Pvt. Ltd. Company.
Upon receipt of brokerage income from main broker, the sub-broker will pay the service tax and deposit it with the Service Tax department. Main broker will in turn reimburse the service tax to the sub-broker. 85% of the brokerage received by sub-broker is then paid to the Pvt. Ltd. Company as a brokerage
Now the basic question is:
Whether the Pvt. Ltd. company is liable to pay service tax in this case? If yes under which head? Since the Pvt. Ltd. company is not registered with SEBI, will the Notification No.1/94-ST dt. 20.06.1994 along with the TRU dtd. 10/09/2004 iv) 3/94-ST dtd. 19/10/1994 iv) 63/96 dtd. June, 1996 iv) 141/ 96 dtd. 04/12/1996 be applicable to the above mentioned case? ( the ammendment exempting the sub-brokers to pay service tax was brought in the year 2009. Whereas the given case pertains to F.Y 2006-08, 2007-08 and 2008-09) If the Pvt. Ltd Company does not fall under the purview of above mentioned notification related to sub-broker, will it be liable to pay Service Tax under business auxilary services ?
11 March 2010
Notification No. 31/2009-Service Tax exempts exempts the taxable service referred to in sub-clause (zzb) of clause (105) of section 65 of the Finance Act,1994, provided by a sub-broker, to a stock-broker as defined in clause (101) of Section 65 of the Finance Act,1994, in relation to sale or purchase of securities listed on a registered stock exchange from the whole of the service tax leviable thereon
CAclubindia
