Credit rating agencies’ services under service tax

By | December 9, 2013

Credit rating agencies’ services under service tax

Service tax has been imposed on services provided by credit rating agencies from 16/10/1998 vide Notification No.53/98-ST, dated 07.10.1998.

“Credit Rating Agency” means any person engaged in the business of credit rating of any debt obligation or of any project or programme requiring finance, whether in the form of debt or otherwise, and includes credit rating of any financial obligation, instrument or security, which has the purpose of providing a potential investor or any other person any information pertaining to the relative safety of timely payment of interest or principal;

“Taxable Service” means any service provided or to be provided to any person,  to a client, by a credit rating agency in relation to credit rating of any financial  obligation, instrument or security;

Value for the purpose of service tax – Gross amount charged by such agency from the client for services rendered in connection with credit rating of any financial obligation, instrument or security in any manner

The information and advisory services, if any ,rendered by credit rating agencies would not attract service tax for the reason that taxable services in respect of credit rating agency means service provided to a client only in relation to credit rating of any financial obligation, instrument or security.

Services of research and business aspects of a company, other customized services on say business houses and capital markets, indexing services and information services such as privatization policy for infrastructure projects, macro studies of infrastructure sector, implication of government policy in respect of any sector, financial modeling, bid evaluation, power purchase agreement, restructuring of state electricity boards, etc are not services ‘in relation to’ credit rating of any financial obligation, instrument or security and are hence outside the gamut of service tax on the services of credit ratings.

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