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GST for Stock Broker Authorized Person

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This page outlines your GST duty if you are a sub broker or authorized Person of a stock broker in India. The GST now applies to thousands of Zerodha APs, Sharekhan sub brokers, Geojit, Motilal, Karvy, Edelweiss, India Bulls, and Anand Rathi sub brokers. The new rule applies to both discount brokers and full-service brokers.

India’s Goods and Services Tax (or “GST”) went into effect on July 1, 2017. GST is a significant modification to the indirect tax system that affects not just tax rates but also different business operations and related documentation.

Before July 1, 2017, sub brokers and authorized persons (AP) were exempt from service tax obligations under the service tax law since the main broker was responsible for covering their obligations. The approved or sub-brokers had no obligation to register for service tax.

Since the introduction of GST, this has altered. The Central Goods and Services Tax Act of 2017 defines compulsory registration, which means that under GST, agents and sub brokers must register themselves.

Key Points :

  • According to section 24(vii), anyone who provides taxable products, services, or both on behalf of other taxable individuals, whether as an agent or not.
  • According to Section 2(5) of the Central Goods and Services Tax Act of 2017, an agent is defined as any person, including a factor, broker, commission agent, arhatia, del credere agent, or auctioneer, who conducts the business of supplying or receiving goods or services, or both, on behalf of another.
  • In accordance with Section 2(13) of the IGST Act of 2017, an intermediary is defined as a broker, agent, or any other person, by whatever name called, who coordinates or facilitates the supply of goods, services, or both to two or more people, but excludes anyone who does so for his or her own account.

In plain English, a broker is a middleman or negotiator who represents parties looking to purchase or sell stocks, bonds, land, personal property, commodities, or services in the contracting of any kind of agreement. A key distinction between an agent and a broker is that the latter serves as a middleman. A broker acts as an agent for both parties while arranging a deal. The GST Act groups all intermediaries together with commission agents, brokers, etc. as “agents” who conduct the business of providing or receiving goods and/or services on behalf of another.

Thus it is safe is assume that:

  • Every Sub Broker and Authorised Person must register for GST.
  • Since Sec. 24 supersedes Sec. 22, the turnover requirement of Rs. 20 lacs (Rs. 10 lacs) is not applicable.
  • You must create an invoice in the name of your broker at the end of each month and add GST if you register for GST. (For instance, if your main broker and you split a certain month’s total brokerage at 50:50, you would receive a commission of Rs. 1,000,000.)

You will raise to your broker the following bill:

  • Total Commission Share: Rs 1,00,000
  • Add CGST @ 9%: Rs 9,000
  • Add SGST @ 9%: Rs 9,000
  • Invoice Total: Rs 1,18,000

Before the fifth day of the following month, the sub broker or authorized person must deposit this Rs 18,000 GST into the government account.

Additionally, the principal brokers are still obligated to pay GST on the reverse charge for commissions given to sub brokers or franchisees if you decide not to register. It is therefore advised to register unless a special announcement or clarification about the non-applicability of GST on sub brokers, agents, etc. is published.

Note that the author’s expertise is based on the ideas and opinions expressed or suggested above. The person or business is encouraged to use appropriate caution and good judgment before making an educated decision.

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