Sebi seeks service tax exemption with retrospective effect

New Delhi: After securing exemption from service tax this fiscal onwards, capital markets regulator Sebi has asked the government to exempt it from this liability with retrospective effect from July, 2012.

The Securities and Exchange Board of India (Sebi) was asked way back in January 2013 by the Service Tax Department that "services tendered by Sebi" were liable to tax.
Sebi, which regulates the entire gamut of capital markets including thousands of listed companies, brokers, mutual funds and several other entities, has however maintained that the services provided by it do not attract the provisions of service tax and has been seeking an exemption since then.

After several rounds of communications between the tax authorities and the regulator in this regard, the government decided earlier this year to exempt Sebi from the ambit of service tax with a prospective effect from April 1, 2016. An announcement in this regard was made by Finance Minister Arun Jaitley in this year's annual budget.

Not satisfied with the exemption with prospective effect, Sebi Chairman U K Sinha has written to Finance Minister, Revenue Secretary and Economic Affairs Secretary, seeking an exemption with effect from July 1, 2012, as per notes to the regulator's draft annual statement of accounts for 2015-16.

This annual report would be presented before Sebi's board this week for its approval.

Giving details of various 'contingent liabilities', Sebi said that it was informed first on January 11, 2013, by the Service Tax Department that services rendered by Sebi were not covered under 'negative list' and was asked to discharge the service tax liability at the earliest "on the value of services provided by Sebi with effect from July 1, 2012".

Contesting the demand, Sebi wrote several letters to the Commissioner of Service Tax between July 2013 and June 2014, requesting closure of the proceedings.

In the meantime, Sebi also wrote to the Finance Ministry in December 2013 requesting inclusion of Sebi in the 'Negative List' of entities exempt from service tax.

In March 2015, a summon was also issued to Sebi to provide details of various fees collected by it between July 2012 to December 2015, which were replied to by the regulator.

Sebi again provided a brief description of its fees and receipts in October 2015, in reply to yet another letter from the service tax department.

In the meantime, Sebi wrote again to the Finance Ministry in April 2015 seeking its inclusion in the 'Negative List'. Subsequently, Sebi took up the matter several times with the government between October 2015 and January 2016, including through letters to the Finance Minister, Revenue Secretary and the Economic Affairs Secretary, requesting exemption from the service tax and its inclusion in the "Negative List".

Finally, the exemption was given in the Budget for 2016-17 though with effect from April 1, 2016, prompting the Sebi Chairman to write again to the government.