Brokers have urged the Forward Markets Commission (FMC) to clarify on the service tax on exchange transaction charges in commodity futures trading.
In a recent meeting between the members of national commodity exchanges in the south zone and the regulator, almost all brokers expressed concerns over the issue as they see the tax as a huge financial burden on them.
Broking firms had to remit a huge sum as the service tax on exchange transaction charges as it had been due effective from October 2004.
It is learnt that FMC Chairman S Sundareshan assured the members that the commission had already taken up the issue with the ministry of consumer affairs and a solution would be reached soon.
In the capital markets, the service tax is collected only on the brokerage at a rate of 12.2 per cent. But for the commodity futures mart, the central excise department even insists on tax on exchange transaction charges. And the department issued several notices in this regard.
A director of a leading brokerage said it was a discrimination to collect tax on transaction charges. He stressed that the same procedure should be practised in both the capital and commodity markets.
We paid crores of rupees on the instruction of the excise department. This part is the income of the exchanges why should we pay for that, he said.
Earlier, a section of brokers had appealed to the department and also sought the intervention of FMC.
A top official of a leading broking house of the country said what was happening was owing to lack of necessary guidelines from the government. There was no logic behind adopting double standards for a similar line of business.
After getting assurance from the FMC chairman of taking up the issue seriously and settling it amicably, broking firms are hoping for the best, keeping their fingers crossed.