Clarification regarding taxability of supply of securities under Securities Lending Scheme, 1997 – reg.

15

Oct

Clarification regarding taxability of supply of securities under Securities Lending Scheme, 1997 – reg.

Oct 15 2019 Download Author: Shobhana Srivastava GST Input Tax Credit 19

Under the securities lending scheme,1997, lender of securities  through an approved intermediary lends to a

borrower securities for a specified period of time under an agreement with the condition that the borrower will

return the securities of same class or type at the end of the specified period of time along with the additional  

Corporate benefit accruing on securities borrowed.

It may be noted that for the purpose of GST Act, securities shall have the same meaning as assigned to it in clause (h) of section 2 of Securities contract and (Regulation) Act,1956.

The definition of securities are not covered under the definition of Goods and services under the GST Act,2017.

Therefore a transaction in securities which involves disposal of securities is not a supply in GST and hence not taxable.

The activity of  lending of Securities is not a transaction in securities as it does not involve the disposal of securities. The securities lending scheme does not treat lending of securities as disposal of securities and

Therefore is not excluded from the definition of services.

The lending fee charged by the lender from the borrower of securities has the character of consideration and this activity is taxable under GST since 1.07.2017.

The supply of lending of securities under the scheme is classifiable under heading 997119 and is leviable to GST@18%

With effect from 1st October, 2019, the borrower of securities shall be liable to discharge GST under reverse charge mechanism (RCM). The nature of GST to be paid shall be IGST under RCM.

 

 

 

Under the securities lending scheme,1997, lender of securities  through an approved intermediary lends to a

borrower securities for a specified period of time under an agreement with the condition that the borrower will

return the securities of same class or type at the end of the specified period of time along with the additional  

Corporate benefit accruing on securities borrowed.

It may be noted that for the purpose of GST Act, securities shall have the same meaning as assigned to it in clause (h) of section 2 of Securities contract and (Regulation) Act,1956.

The definition of securities are not covered under the definition of Goods and services under the GST Act,2017.

Therefore a transaction in securities which involves disposal of securities is not a supply in GST and hence not taxable.

The activity of  lending of Securities is not a transaction in securities as it does not involve the disposal of securities. The securities lending scheme does not treat lending of securities as disposal of securities and

Therefore is not excluded from the definition of services.

The lending fee charged by the lender from the borrower of securities has the character of consideration and this activity is taxable under GST since 1.07.2017.

The supply of lending of securities under the scheme is classifiable under heading 997119 and is leviable to GST@18%

With effect from 1st October, 2019, the borrower of securities shall be liable to discharge GST under reverse charge mechanism (RCM). The nature of GST to be paid shall be IGST under RCM.