Delayed payment charges are compensatory defaults, not consideration for agreeing to tolerate an act or taxable stockbroking services.

Delayed payment charges recovered by a stockbroker for clients' settlement defaults or margin trading obligations are penal and compensatory amounts for overdue payments, not consideration for stockbroking services or for agreeing to tolerate an act under Section 66E(e). Such charges arise only after the broker discharges exchange settlement obligations, while contractual penalty clauses protect commercial interests and do not make delayed payment the object of the arrangement. Departmental service-tax and GST circulars similarly recognise that delayed payment charges are not consideration for taxable services. Accordingly, these charges are not taxable as a declared service.

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Issues: Whether delayed payment charges recovered by a stockbroker from clients for delayed settlement obligations or margin trading facility are taxable as consideration for agreeing to tolerate an act under Section 66E(e).

Analysis: Delayed payment charges arise only upon default in timely payment, after the stockbroker has discharged settlement obligations to the exchange. They are penal and compensatory charges for overdue amounts, not charges for stockbroking services or a separately agreed activity of tolerating delayed payment. The contractual penal clauses safeguard commercial interests and do not establish that the parties intended delay as the object of the arrangement. Departmental circulars under the service-tax and GST regimes also recognise that delayed payment charges are not consideration for taxable services.

Conclusion: Delayed payment charges are not taxable as a declared service under Section 66E(e); the issue is decided in favour of the assessee.

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