After finding instances of service tax evasion by sub brokers, the Comptroller and Auditor General of India (CAG) had prompted tax authorities to issue orders to several south India-based sub-brokers to pay service tax. However, the recently announced Budget has brought cheers to the sub-brokers by excluding them from the purview of service tax and has also cleared the confusion persisting over their fate.
Recently, the CAG had observed that many sub-brokers were not paying service tax even in the case of taxability under “Business Auxiliary Services” (Section 65-19 of the Service Tax Rules).
On the other hand, sub-brokers protested over the CAG finding and contended it was unfair as contract transaction by member-brokers and payments were also received and made by brokers only. Hence, the main broker had deducted service tax and paid commission to sub-brokers accordingly, leaving sub-brokers away from the tax net.