The Board has issued clarification that the
activities of the Stock and Commodity Exchanges and that of their Clearing
Houses as regards to providing electronic platform and other related services
for trading in shares, stocks, debentures, bonds and commodity etc., clearing
and settlement of stocks and/or trades, validating the transactions, keeping
account of buying and selling, maintaining payment details, debiting and
crediting customer’s accounts, providing guarantees to the parties (brokers or
investors), do not fall under any category of the taxable services, though
such activities of Exchanges/Clearing Houses are in the nature of "service".
The Board has examined these activities from the point of
view of "Online Information and Database Access or Retrievable Service",
"provision and transfer of information and data processing (under Banking or
Other Financial Services)" and come to the conclusion that though the
Exchanges/ Clearing Houses do process, exchanges/ transfer and provide online
data during the course of their business, the same is only incidental to
ensure transactions of stock/ commodities and their settlement and is not the
principal service provided by them. Further, no separate charges are collected
for information and data processing or access/ retrievable by the
exchanges/clearing houses during the course of such trading. The transactions
charges collected by the exchanges are based on the quantum (in money value)
of transaction in stock or commodity, as the case may be and not on the volume
of data interchanged/access/ retrieved. Such activities do not fall under the
category of "Business Auxiliary Service" as they are not performed on behalf
of any other person. They are also not covered under the category of services
provided by "Club or Association " as the Exchanges and Clearing Houses are
corporate bodies which provide service to investors through a registered
member as against to its own members.
However, if the service of "online information" is provided
by the exchange on payment basis, the same is liable to tax.
(Source : Letter F. No. 137/57/2006-CX-4 dated 18-5-2007)
