2026-VIL-861-CESTAT-HYD-ST
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SERVICE TAX CESTAT Cases

Service Tax on Delayed Payment Charges in Stock Broking Services – Appellant collected penalties from clients for delayed payment of settlement amounts to the stock exchange, treating such charges as delayed payment charges rather than service tax consideration - Department sought to levy service tax on these amounts as declared service under section 66E(e) of the Finance Act, 1994, contending that tolerating delayed payment constituted a taxable service – HELD - The delayed payment charges collected by stock brokers for amounts advanced on behalf of clients towards purchase of securities are relatable to interest on funds deployed and thus fall within the negative list under section 66D(n) of the Finance Act, 1994, covering deposits, loans or advances where consideration is by way of interest or discount - Although the Board's earlier Circular dated 03.08.2011 became inapplicable post-01.07.2012 due to material changes in law including introduction of the negative list and declared service provisions, the delayed payment charges pertaining to stock broking services represent time value of money and constitute interest on advances extended to clients, thereby exempting them from service tax liability under the negative list rather than treating them as declared service - The demand of service tax on delayed payment charges towards stock broking services is set aside. However, the demand of service tax on delayed payment charges towards DEMAT account services is upheld - The appeal is partly allowed - Service Tax on Delayed Payment Charges in DEMAT Account Services - The delayed payment charges collected for failure to pay account maintenance fees cannot be equated to interest and therefore does not qualify for exemption under the negative list. Such charges represent consideration received for tolerating the act of default in payment by the account holder and thus constitute declared service under section 66E(e), making them liable to service tax as integral components of the DEMAT account service. The demand of service tax on delayed payment charges towards DEMAT account services is upheld.
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GSTAT Appeal filed wrongly...
By CA Vivek Jalan

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