Under GST "services" means 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;
![Implications of GST on Stock Lending Scheme Implications of GST on Stock Lending Scheme](/img/preview/paidnfree/j.jpg)
Explanation.- For the removal of doubts, it is hereby clarified that the expression “services” includes facilitating or arranging transactions in securities; Therefore, goods and service under GST does not include securities. Further transaction in securities that involves disposal of securities is not supplied in GST hence not taxable. Securities lending scheme, 1997 is regulated by the SEBI for the purpose of facilitating lending and borrowing of securities.
Under the scheme, the lending of security takes place through intermediary under an agreement for a specified period with condition that the borrower will return equivalent securities of the same type or class at the end of the specified period along with the corporate benefits accruing on the securities borrowed. The transaction takes place through an electronic screen-based order matching mechanism provided by a recognized stock exchange. There is anonymity between the lender and borrower since there is no direct agreement between them. Lender is the person who deposits the securities registered in his name or in the name of any other person as authorized by such person with approved intermediary for the purpose of lending under the scheme. The lend securities are held by the borrower for which the lender will charge lending fees. The borrower of the securities can further buy or sell these securities and it is required to return the lend securities after the stipulated period of time. The lending fees has the character of consideration and this activity is taxable under GST.
The lending of securities is not a transaction in securities as does not involves disposal of securities and hence it gets covered under the definition of service mentioned above. The lending of securities is classifiable under heading 9977119 and is leviable to GST @18% as per notification 11/2017-CT (R) dated 28.06.2017 as amended from time to time. The same has been covered under forward charge until 01.10.2019 as the same got covered under reverse charge mechanism w.e.f. 01.10.2019 vide notification 22/2019-CT (R) The nature of GST to be paid shall be IGST under RCM.