2019 (8) TMI 32 - AAAR - GST

Levy of GST - Delayed payment of tharges which are overdue from the client towards trading of securities and reimbursed to them - HELD THAT - Where The client makes delay (i.e. beyond T 1 statutory time limit for payment as per SEBI regulations) in reimbursing the expense (being purchase consideration of the securities bought for client and already collected from stock broker by stock exchange with T 1 time limit) to the broker and broker charges amount on delay of such reimbursement of expense, for securities purchased from the client - It is purely a deferment of liability only which arose since the payment was not made within the stipulated period of time by the client to the Stock Exchange for purchase of Securities. Since the service of buying and selling of securities which is exempted under GST, as per the definitions of 'goods' and 'services' under the Section 2(52) and 2(102) of CGST Act, 2017, the corresponding delayed payment charges which are also linked to the above service of trading of securities should also stand exempt under GST. Applicant is not liable to pay GST on the delayed payment charges on reimbursement of amount by client to Applicant, where client failed to pay amount paid to Stock Exchange for purchase of securities with T 1 (trading day plus one day) under SEBI Regulation norms and deducted by Stock Exchange from Applicant account being purchase consideration of securities which are neither goods nor services under GST.

Summary

Issues:
1. Whether GST is payable on delayed payment charges collected by the Appellant from a client for securities purchased.
2. Interpretation of relevant provisions under the CGST Act and UPGST Act.
3. Consideration of FAQ issued by CBIC and a ruling by the Rajasthan AAAR.

Analysis:
1. The appeal was filed against an Advance Ruling Order by M/s. SPFL Securities Ltd. regarding the taxability of delayed payment charges. The Appellate Authority clarified that unless specified, provisions of the CGST Act also apply to the UPGST Act.

2. The Appellant, a stockbroker, engaged in stock broking services, sought a ruling on the taxability of delayed payment charges on reimbursement from clients. The Authority for Advance Ruling initially ruled that GST was applicable on such charges.

3. The Appellant challenged the ruling citing FAQ No. 80 issued by CBIC, which stated that delayed payment charges for brokerage/settlement obligations are not leviable to GST. Reference was also made to a ruling by the Rajasthan AAAR exempting GST on delayed payment charges.

4. During the personal hearing, the Appellant argued that the delayed payment charges were not related to stock broking activities subject to GST but were due to delays in client payments to the Stock Exchange. The Appellant highlighted the nature of the charges and referred to definitions under the CGST Act.

5. The Appellate Authority analyzed the mechanism of the securities market and the nature of delayed payment charges. It concluded that since trading of securities is exempt under GST, delayed payment charges linked to such services should also be exempt.

6. The Authority considered the FAQ amendment by CBIC, which clarified that GST is not applicable on delayed payment charges for settlement obligations. This clarification was made after the initial ruling by the Advance Ruling Authority.

7. Consequently, the Appellate Authority modified the ruling, stating that the Appellant is not liable to pay GST on delayed payment charges collected from clients for securities purchased, where the client failed to pay the Stock Exchange within the stipulated time.

This detailed analysis of the judgment provides a comprehensive overview of the issues raised, arguments presented, and the final ruling by the Appellate Authority for Advance Ruling in Uttar Pradesh.