GST EBOOKS | GST BOT | GST APPSUITE | GST TETAC | GST UCP | GST COMMUNITY | GST KNOWLEDGE FORUM | ICT ENABLED TAX DESK | CAREER | COLLABORATORS | CSR | CUSTOMERS | CONTACT US
GST is not payable by the stock brokers on these recoveries as long as the conditions of pure agent as provided in Rule 33 of the CGST Rules, 2017 are met. If not, then valuation will be done as per section 15 of the CGST Act, 2017 read with Rule 27 of CGST Rules, 2017. |
Section 25(3) of the CGST Act, 2017 states that “a person, though not liable to be registered under section 22 or section 24 of the CGST Act, 2017 may get himself registered voluntarily, and all provisions of this Act, as are applicable to a registered person, shall apply to such person.” Therefore, any person may choose to get voluntary registration under the Act. |
Any interest/ delayed payment charges charged for delay in payment of brokerage amount/settlement obligations/margin trading facility shall be leviable to GST. |
In case of stock broking, the details of the address of the client are required to be updated with the Stock Exchange as part of the “Unique Client Code” details. Therefore, in case of domestic supplies of such services, address on record with the stock brokers shall be the “location of the recipient of services” in terms of section 12(12) of the IGST Act, 2017. However, in cases where the the location of the recipient is outside India, the place of supply shall be determined as per section 13(8) of the IGST Act, 2017 i.e. as an intermediary. |
Yes.
Since stock brokers arrange the supply of securities between two or more
persons, stock brokers would be covered by the definition of
“intermediary”. |
As
per Stock Brokers and Sub Brokers Regulation, 1992 issued by SEBI, a
“subbroker” means “any person, not being a member of stock exchange, who acts
on behalf of a stock broker as an agent or otherwise for assisting the
investors in buying, selling or dealing in securities through such stock
brokers”. It is, therefore, apparent that the sub broker may not only be
providing services to the stock broker but may also be providing services to
the clients and receiving consideration from both. Thus, in such a scenario
where the sub broker is providing services both to the broker and the
investor on behalf of the broker, he would be duly covered by the definition
of ”agent” as provided in Section 2(5) of the CGST Act, and needs to
compulsorily register without the threshold under Section 24(vii) of the CGST
Act, 2017. In case the sub-brokers do not provide any service to the clients on behalf of stock broker (for example referral commission only), then the said sub-brokers would not fall in the definition of “agent” under the CGST Act, 2017. |
Section
2(85) of the CGST Act, 2017 defines “place of business” to include: (i) a place from where the business is ordinarily carried on, and includes a warehouse, a godown or any other place where a taxable person stores his goods, supplies or receives goods or services or both; or (ii) a place where a taxable person maintains his books of account; or (iii) a place where a taxable person is engaged in business through an agent, by whatever name called. In case of operations of a stock broker, it is required by law that all transactions would be via screen based trading on the Stock Exchanges. Therefore, the following would be the “place of business” in case of stock brokers: (i) All the branches of the stock broker where the Stock Exchange Trading terminals are located and where trade is carried out on behalf of clients; (ii) Main office/ Head office/ Registered Office/ Branch office where back office operations are carried out including issuing of bills/ contracts/ tax invoices/ account statements to the clients. In case of sub-brokers’ / Authorised Person office, where the premises are neither owned by the stock broker nor rented/ leased in favour of the stock broker and there are no employees on the payroll of the stock broker in such an office, then such premises shall not be considered a place of business of the stock broker. |
The
stock broker being an intermediary, this situation shall be covered under the
provisions of section 13(8)(b) of the IGST Act, 2017 which provides that the
place of supply shall be the location of the supplier of services. Thus such
a supply will be treated as an intra-State supply and would be subject to
Central tax and State tax / Union territory tax, as the case may be. |
Under
section 19(1) of the IGST Act, 2017 “a registered person who has paid
integrated tax on a supply considered by him to be an inter-State supply, but
which is subsequently held to be an intra-State supply, shall be granted
refund of the amount of integrated tax so paid in such manner and subject to
such conditions as may be prescribed”. Under section 19(2) of the IGST Act, 2017 “a registered person who has paid Central tax and State tax or Union territory tax, as the case may be, on a transaction considered by him to be an intra-State supply, but which is subsequently held to be an inter-State supply, shall not be required to pay any interest on the amount of integrated tax payable”. Therefore, in case a registered person has paid Integrated tax instead of Central tax and State tax or Union territory tax, then he shall be granted refund of the amount paid as Integrated tax and he will have to pay Central tax and State tax or Union territory tax. Further, no interest will be payable on the Central tax and State tax or Union territory tax so paid. Further, in case a registered person has paid Central tax and State tax or Union territory tax instead of Integrated tax, then he shall be granted refund of the amount paid as Central tax and State tax or Union territory tax and he will have to pay Integrated tax. However, no interest shall be payable on the Integrated tax amount so paid. |
In the
context of stock broking, funds/ securities are provided by the clients to
the stock brokers in advance of the potential orders/ trades that would lead
to margin/ settlement obligations. All such advances will fall in the
category of deposit under the proviso to section 2(31) of the CGST Act, 2017
and thus will not be considered as payment made for such supply unless the
stock broker applies such deposit as consideration for the said supply in his
books of accounts. |
Section
2(101) of the CGST Act, 2017 defines “securities” to have the same meaning as
assigned to it in clause (h) of section 2 of the Securities Contracts
(Regulation) Act, 1956. Section 2(52) of the CGST Act, 2017 defines “goods” to mean every kind of movable property other than money and securities but includes actionable claim, growing crops, grass and things attached to or forming part of the land which are agreed to be severed before supply or under a contract of supply. Thus, securities are not goods under the CGST Act, 2017. Section 2(102) of the CGST Act, 2017 defines “services” to mean anything other than goods, money and securities but includes activities relating to the use of money or its conversion by cash or by any other mode, from one form, currency or denomination, to another form, currency or denomination for which a separate consideration is charged. Thus, securities are not services under the CGST Act, 2017. Since securities neither fall in the definition of goods nor in the definition of services, they fall in the definition of “non-taxable supply” under section 2(78) of the CGST Act, 2017. |
Section
2(18) of the CGST Act, 2017 defines “business vertical” to mean “a
distinguishable component of an enterprise that is engaged in the supply of
individual goods or services or a group of related goods or services which is
subject to risks and returns that are different from those of the other
business verticals. Explanation.––For the purposes of this clause, factors that should be considered in determining whether goods or services are related include–– (i) the nature of the goods or services; (ii) the nature of the production processes; (iii) the type or class of customers for the goods or services; (iv) the methods used to distribute the goods or supply of services; and (v) the nature of regulatory environment (wherever applicable), including banking, insurance, or public utilities”. It is the choice of the taxable person to build all the services provided in one vertical or separate verticals based on their business models and requirements. They may choose to obtain separate registration as a business vertical in terms of the proviso to section 25(2) of the CGST Act, 2017. |
Exit
load in the form of a fee (whether or not as a fixed percentage of the
investment) is liable to GST. Even if the exit load is in the form of units
in the fund, it may be concluded that the consideration received in money was
later converted to NAV units. |