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GST for Authorized Person(AP) and Stock Sub Broker

Published on Friday, July 7, 2017 by

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GST for Authorized Person(AP) and Stock Sub Broker

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

You will raise to your broker the following bill:

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

The sub broker or authorized person has to pay this ₹18,000 GST to the government account before the 5th 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.

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User Comment

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10. yogendra surana  Jun 7, 2018 14:23 Reply
I AM AUTHROSIED PERSON OF SAFAL CAPITAL INDIA LTD REGISTERED WITH SEBI MY BROKRAGE IS BELOW 2000000 TWENTY LAKH KYA MUZE GST REGISTERED HONA CHAIYA PLEASE REPLAY OF ANY ONE

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10.1. Gaurav Bansal  Aug 21, 2018 14:01
yes indeed
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9. imNewToIPO  Aug 15, 2017 16:14 Reply
plz help me anyone expert:: i want to take franchise of broking firm .. which is good for me in long run by becoming Sub Broker or Athorised person ??? guide with proper details
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9.2. sundar  Sep 13, 2017 11:03
pls call me i will help with good service gst and othrrs
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9.3. ANIL SINGH  Oct 3, 2017 15:17
Go with EDELWEISS BROKING. It is a good company with great MARKETING support.
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8. yogendra surana  Dec 23, 2017 14:08 Reply
I am sub broker for safal capital. When I do some trading of my client, the bill is directly raised bysafal to my client and from the brokerage which he receives from my client out of which he gives my certain percentage. Now the brokerage which I received from safal I share65;35 with some one else who also gets clients for me. Will I am eligible for GST and also what about the third person who also gets clients for me? i am an brokrage less than 10.00000
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7. RANITA MAJUMDER  Aug 2, 2017 16:58 Reply
I AM AN AUTHORIZED PERSON ASSOCIATED WITH SMC KOLKATA BRANCH & MY MONTHLY BROKERAGE IN 15OOO/- TO 25000 /-. I HAVE A SHARING OF 50:50 RATIO WITH THE COMPANY. NOW PLEASE TELL ME WHETHER I AM SUPPOSED TO GET THE GST NUMBER OR NOT? AND IF YES THEN PLEASE EXPLAIN IN DETAILS KEEPING IN MIND MY MONTLY BROKERAGE
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7.1. hemchand tiwary  Aug 5, 2017 17:13
Hi Ranita,

In case of AP , restriction of 2 lakh not applicable and you have to apply for GST ID.

If you want to take GST ID please contact me on htiwary@gmail.com and share your cell no. also so that i could reach you on your number.
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7.2. Ram kumar  Nov 3, 2017 15:17
Sir i want ur nubrr pls
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6. Keyur  Sep 21, 2017 14:33 Reply
I am sub broker for Angel Broking. When I do some trading of my client, the bill is directly raised by Angel to my client and from the brokerage which he receives from my client out of which he gives my certain percentage. Now the brokerage which I received from Angel I share 50:50 with some one else who also gets clients for me. Will I am eligible for GST and also what about the third person who also gets clients for me?
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5. SAURABH RASTOGI  Aug 26, 2017 17:09 Reply
Hi I am an authorised person with Anand Rathi ,I am also confused regarding filing of GST return ,though i have got registered under GST on pressure from the broker .Please if any one can guide
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4. mukesh maheshwari  Aug 20, 2017 00:00 Reply
main broker ko input amout mil jayega . par authorise persion ko input amout kaise milegi
gst registration karwa jaruri hai yah order aa gaya bade dharm shankat mai hai kya kare,,,,
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3. ANUJ SHARMA  Aug 14, 2017 14:42 Reply
hi
Authorised person has to file any type of return and what will be further procedure
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2. Naresh aggarwal  Aug 8, 2017 12:00 Reply
In my opinion , it is main broker who is liable to compulsory registration u/s 24(vii), not the Authorized person,
Because the office of the Authorized person is the extension of the office of the main broker, and all the services are given there are deemed to be services given by the main broker, as client registration, contract notes , money and securities received and delivered by the main broker.
Authorized person are giving services only to the main brokers and receive commission for it.
So Authorized person are liable to register only when his income increased above Rs.20 lacs. and if he is not register, GST is applicable on main broker under RCM, In RCM main broker first himself pay GST and then claim input credit for it and nothing to be deducted from the Authorized person commission.

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2.1. Amit N Shah  Aug 9, 2017 17:40
I m a Authorized person of recognized stock exchange.having sebi registration . My brokerage is below 20 lacs p.a.
Do I need to take G s t registration?

My broker force me to do registration for GST under section 24 (Vii)
what option I have? Any specific rule/section which give me clear exemption for doing registration?
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1. Bijan Mondal  Aug 1, 2017 12:54 Reply
Myself is a AP of Nirmal Bang at Patna (Bihar). Kindly tell where (in which deptt / office) to get registered for GST No. for this category? Thanks.
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11.1. hemchand tiwary  Aug 5, 2017 17:10
Hi Bijan,

You don''t have to approach any office, you could just share 2 or 3 important details with any GST practitioner and he will do the needful. I am a native of Anisabad , Patna, Bihar and currently living at Kolkata.

If you want to take GST ID please contact me on htiwary@gmail.com and share your cell no. also so that i could reach you on your number.



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