TaxTMI 
TaxTMI 
2026 (7) TMI 1191
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.... of service tax on Delayed Payment Charges [DPC] under the provisions of section 66E(e) of the Finance Act, 19943. [the Act] 2. The factual matrix of the case as stated by the appellant is that they are engaged in rendition of stock broking services by providing trading facility to its customers/clients by offering trading platform where the clients can trade in equity shares, mutual funds and other securities, currency derivatives, etc. The Appellant also provides Margin Trading Facility ("MTF") to its clients who are registered with it for availing stock broking services. The clients desirous of trading are required, on settlement date, which is transaction date + 2 days ("T+2 days"), to pay-off their settlement obligations. In case of....
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..... 4. We have heard Shri Tarun Gulati, learned senior counsel for the appellant and Shri Dhirender Singh Garbyal, learned authorized representative for the Revenue at length. 5. The appellant has submitted that the issue whether DPC is chargeable to service tax has been considered by various Benches of this Tribunal rejecting the submission of the Revenue that DPC is towards the charges for tolerating an act of delayed payment of funds by the clients. The submission is that DPC is not includable in the taxable value for charging service tax and it does not constitute a declared service under section 66E(e) of the Act. Reliance has been placed on the following decisions: (i) Globe Capital Market Limited vs. Additional Director ....
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....hich is the direct "consideration" for the appellant tolerating the delay. 7. The concept of DPC is linked to the payment which is to be made by the clients by a particular settled date but has not been paid so and in view of the delay, the appellant deposited the amount and charged DPC from their clients. Learned counsel for the appellant has referred to contractual clauses of the agreement such as voluntary terms and conditions, policies and procedure and the rights and obligations of the beneficial owner and depository participants as prescribed by SEBI. 8. Having perused the various decisions relied upon by him we are of the opinion that the issue has been well settled that DPC is not includable in the taxable value for charging s....
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.... be charged with delayed payment charges". Perusal of the said clause reveals that the DPCs are collected only in case of overdue payments. The reasoning of the Commissioner that the origin of the DPC has taken place on account of business or service of sale/purchase of securities by a stock-broker and the same has to be considered as a part of the service does not appeal to us, for the simple reason that such DPC collection has got nothing to do with the sale/purchase of the securities, a service which the appellants is rendering as a stock-broker but admittedly is a charge recovered from only those customers, who delayed the payments of the securities value and is in fact is a penal interest, for compensating the assessee for the payments....
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....penal interest satisfies the definition of "interest" as contained in Notification No. 12/2017 - Central Tax (Rate) dated 28.06.2017. 11. The reference invited by the learned Counsel to CBIC FAQ on Banking Insurance and Stock Broker Sector as updated on 27.12.2018 categorically answered that no GST is leviable on interest/delayed payment charges for debit for settlement obligations/margin trading facility. The relevant portion is quoted below: Is GST leviable on interest/ delayed payment charges charged to clients for debit for settlement obligations/ margin trading facility? Any interest/ delayed payment charges charged for delay in payment of brokerage amount/ settlement obligations/ margin trading facility shall not be leviable ....