Government of India
(Ministry of Finance & Company Affairs)
Department of Revenue
(Central Board of Excise & Customs)
18th December, 2002.
Subject: Levy of Service Tax on Depository Service under Banking & other Financial services.
I am directed to say that doubts have been raised as to whether Service Tax is payable on the services rendered by Central Depository Services (India) Limited (CDSL). CDSL is providing depository services in respect of DEMAT stocks to its customers. It has also implemented “Electronic Access to Securities Information” (easi), to enable the owner to access accounts in the first phase and transact depository business in the second phase of the project. CSDL charges certain fee such as registration fee, annual fee etc for providing service of easi.
2. A clarification has been sought in regard to applicability of service tax levy on the service of ‘easi’, in view of clarification issued vide F.No.B-11/1/2001-TRU dated 9-7-2001 that e-commerce would not be liable to service tax under the category of “on line information and data base access and /or retrieval service”.
3. The matter has been examined in the Board. Instructions issued vide F.No.B-11/1/2001-TRU dated 9.7.2001 had clarified in Annexure-IV that in e-commerce transactions, no service of online information and database access/retrieval was involved and therefore, e-commerce transactions would not, ordinarily, be covered under the service tax net.
However, this clarification is not applicable to services covered under other taxable services including “banking and other financial services” which are provided through INTERNET.
4. Service tax has been imposed on ‘banking and other financial service’ with effect from 16.07.2001. Depository service is one of the services covered under the category of ‘banking and other financial services.’ The definition of ‘Banking and other financial services’ as given in section 65 of the Finance Act 1994 includes “provision and transfer of information and data processing”. “Banking and other financial services” and “on line information and data base access and/or retrieval service” are two distinct taxable services having distinct coverage. The service of ‘easi’ provided by CDSL is a part and parcel of depository service and hence covered under the category of “banking and other financial service”. They are liable to pay service tax on all depository service even if service is provided through Internet.
5. Suitable trade notice may be issued for the information of the trade.
6. The receipt of this circular may kindly be acknowledged.
7. Hindi version will follow.