Tax authorities have served notices to hundreds of sub-brokers and asked them for payment of service tax for the last four years. This move is creating difficulties for them. The arrears and penalty only total to huge amount and at present, this could make many of them out of business, said a stockbroker. More than 200 sub-brokers of Geojit Financial Service Ltd, a Kerala-based broking firm, received notices asking them to pay service tax from October 2004.
The tax authorities, it is learnt, have acted on the basis of an observation made by the Comptroller and Auditor-General (CAG) that services rendered by a sub-broker to the main broker are taxable under “Business Auxiliary Services” (under Section 65(19) of the Service Tax Rules).
However, according to the brokers, sub-brokers are not registered with the Service Tax Department as they do not directly issue bills and collect payments from clients. They are registered with the main broker and the service taxes on brokerages are collected and paid by the main broker.
The tax authorities, it is learnt, have acted on the basis of an observation made by the Comptroller and Auditor-General (CAG) that services rendered by a sub-broker to the main broker are taxable under “Business Auxiliary Services” (under Section 65(19) of the Service Tax Rules).
However, according to the brokers, sub-brokers are not registered with the Service Tax Department as they do not directly issue bills and collect payments from clients. They are registered with the main broker and the service taxes on brokerages are collected and paid by the main broker.
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