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TAX LIABILITY ON FORWARD CONTRACTOR (MAIN BROKER)

This query is : Resolved 

MY CLIENT IS PROVIDING SERVICES OF FORWARD CONTRACT & COLLECT BROKERAGE & TURNOVER CHARGES. TURNOVER CHARGES IS COLLECTED ON BEHALF OF NCDEX,MCX ETC. WHICH IS PAID TO THEM. HE HAS PAID SERVICE TAX ON ONLY BROKERAGE NOT ON TURNOVER CHARGES.

I WANT TO KNOW WHETHER HE IS LIABLE FOR SERVICE TAX ON TURNOVER CHARGES OR NOT? IF YES THEN GIVE ME FULL DETAILS ABOUT IT & REFER CASE LAWS ETC.

THANKS
YOURS
MANISH MUNDRA


Dear Manish

Your client need not pay service tax on Turnover charges provided

1] There is an agreement between your client and NCDEX /MCX for collecting such charges on their behalf and to act as an agent for NCDEX/MCX
2] There is ample proof to establish that all turnover charges collected have been paid to NCDEX/MCX (documentary evidence). If the payment has been made in cash, it will not be accepted and the department will insist on payment of service tax.

When both these are established in terms of determination of Value Rules your client need not pay service ax on Turnover charges.

Should you need any further clarification do let me know

If any amount received in any form which is directly attributable to forward contract service is taxable.

Where the provision of service is for consideration received wholly in money, the value shall be gross amount charged by the service provider for provision of service. The term consideration includes any amount payable for the services provided to be provided. The term Gross Amount Charged shall include(i) any amount received towards the service before,during and after provision of such service,and (ii) payment by cheque,credit card,deduction from account and any form of payment by issue of credit notes or debit notes and book adjustment.

Also see valuation rules.

I will also suggest to consider this point for taxability under Forward contact.

1. Taxable service means any service provided or to be provided to any person,
by a member of a recognized association or a registered association,
in relation to forward contract.
2. Forward contract means-the contract for delivery of goods and which is not for ready delivery contract

For ready delivery contract- see 2(i) of FCRA.



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