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SEBI : Brokers Should Not Charge Service Tax On Late Payment Penalty From Stock Investors

As per the notification raised by securities and exchange board of India (SEBI) to stock exchanges, investors making investment under stock exchange are not liable to pay any service tax on late payment fee to there stock brokers unless the amount charged against service tax is mentioned separately in the account statement.

Stock exchanges have notified their member brokers that they should not charge any service tax on late payment penalty from their customers.

SEBI

According to the industry norms, transaction made by broker on behalf of their customers have to be settled with 2 to 3 days of the transaction as late payment attracts penalty. So if investor do not make the payment for his purchases to the broker on time then broker levies late payment charge. But considering other sectors like telecom where there is no service tax on late payment fee, finance ministry and SEBI have clarified that there should not be any service tax on late payment penalty. The only condition which allows brokers to charge service tax is to specify separately in the invoice e.g under a head ‘Service Tax’ rather than clubbing the amount in gross total.

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