GST for Stock Broker Authorized Person

Published on Friday, July 7, 2017 by Chittorgarh.com Team | Modified on Monday, October 21, 2019

If you are a sub broker or authorized Person of a stock broker in India, this article explains your GST liability. Thousands of Zerodha AP's, Sharekhan sub brokers and Geojit, Motilal, Karvy, Edelweiss, India bulls, Anand Rathi Sub brokers now comes under GST. Both discount brokers and full-service brokers are affected by new rule.

Goods and Services Tax ('GST') got effect from July 1, 2017 in India. GST is a fundamental change in the framework of indirect taxes and impacts not only the rates of tax but also various business processes and associated documentation

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 Rs 20 lacs (Rs 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. (Eg. If in a particular month you make a total brokerage of Rs 2,00,000 and your sharing with your main broker is 50:50, then you will get commission of Rs 1,00,000)

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

The sub broker or authorized person has to pay this Rs 18,000 GST to the government account before the 5^th of the next month.

Furthermore, if you are thinking not to get registered also the main brokers are still liable to pay GST on reverse charge for commission paid to sub broker/ franchisee. Hence it is advisable to get registered unless any specific notification or clarity not issued regarding non applicability of GST on Sub broker/ Agents etc.

Note that the above views and the opinion expressed or implied are on the knowledge of the author and the individual or company is advised to take due care and judgment before taking informed decision.