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GST for stock broker

MINI (TEACHER) (27 Points)

07 June 2017

I want to know the impact of GST on a registered stock broker of nse, bse, cse... specially in case when it's a proprietary concern....

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CA Pawan Yadav (Chartered Accountant ) (167 Points)
Replied 15 July 2017

Before July 1, 2017, under the service tax law sub brokers / authorized person (AP) were not liable to pay service tax as liability of sub broker was discharged by the main broker. The sub-brokers or authorized persons were not liable to get registered for service tax.

This has changed after GST is implemented. Now under GST, agents/ sub brokers are liable to get themselves registered due to provision of compulsory registration as defined in The Central Goods and Services Tax Act, 2017.

Here are few key points:

As per section u/s 24 (vii) persons who make taxable supply of goods or services or both on behalf of other taxable persons whether as an agent or otherwise.
Section 2(5) of The Central Goods and Services Tax Act, 2017provides for definition of agent as follows: agents means a person including a factor, broker, commission agent, arhatia, del credere agent, or an auctioneer or any other mercantile agent, by whatever name called, who carries on the business of supply or receipt of goods or services or both on behalf of another.
In terms of provisions of Section 2(13) of the IGST Act, 2017 Intermediary means a broker, an agent or any other person, by whatever name called, who arranges or facilitates the supply of goods or services or both or securities, between two or more persons, but does not include a person who supplies such goods or services or both or securities on his own account

In lay man language broker is an intermediary or negotiator in the contracting of any type of bargain, acting as an agent for parties who wish to buy or sell stocks, bonds, real or personal property, commodities, or services. A distinguishing feature between an agent and a broker is that a broker acts as a middleperson. When a broker arranges a sale, he or she is an agent of both parties. The GST Act clubs all intermediaries as 'agents' who carries on the business of supply or receipt of goods and/or services on behalf of another and clubs these entities together with commission agents, brokers, etc.

Thus it is safe is assume that:

GST registration is mandatory for every Sub Brokers and Authorised Persons.
Turnover criteria of ₹20 lacs (₹10 lacs) not applicable as sec 24 overrides sec 22.
If you register for GST, you will have to make an invoice in the name of your broker at the end of every month and charge GST.