Service tax valuation includes broker transaction charges recovered from clients as part of the taxable consideration.

Transaction charges recovered by stock brokers from clients were held includible in the taxable value for service tax because the amounts, though payable by brokers to the stock exchange under the regulatory framework, formed part of the consideration connected with the taxable service. Applying the valuation principle under section 67 of the Finance Act, 1994, the gross amount charged for the service was treated as taxable value. The contention that the charges were a statutory levy or a mere pass-through on behalf of clients was rejected, and the demand was sustained.

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Issues: Whether transaction charges recovered by stock brokers from clients were includible in the taxable value for levy of service tax.

Analysis: The transaction charges were payable by the stock brokers to the stock exchange under the regulatory framework and were not a levy payable by the customers. When the brokers recovered those charges from clients, the amounts represented consideration connected with the taxable service rendered to the clients. Applying the valuation principle under section 67 of the Finance Act, 1994, the gross amount charged for the service formed part of the taxable value. The plea that the amounts were excluded as a statutory levy or paid merely as a pass-through on behalf of clients was not accepted.

Conclusion: Transaction charges recovered from clients were rightly included in the taxable value, and the demand was sustained.

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