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

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..... pply of securities under Securities Lending Scheme, 1997 ( Scheme ) by the lender is taxable under GST. 2. Securities and Exchange Board of India (SEBI) has prescribed the Securities Lending Scheme, 1997 for the purpose of facilitating lending and borrowing of securities. Under the Scheme, lender of securities lends to a borrower through an approved intermediary to a borrower under an agreement for a specified period with the condition that the borrower will return equivalent securities of the same type or class at the end of the specified period along with the corporate benefits accruing on the securities borrowed. The transaction takes place through an electronic screen-based order matching mechanism provided by the recognis .....

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..... ion for which a separate consideration is charged; 4. Securities as defined in clause (h) of section 2 of the Securities Contracts (Regulation) Act, 1956 (Central Act 42 of 1956) are not covered in the definition of goods under section 2(52) and services under section 2(102) of the KGST Act. Therefore, a transaction in securities is not a supply under GST law and hence not taxable. 4.1 The activity of lending of securities is not a transaction in securities as it does not involve disposal of securities. The clause 4 of para 4 relating to the Scheme under the Securities Lending Scheme, 1997 does not treat lending of securities as disposal of securities. 4.2 The lender temporarily lends the securitie .....

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..... shall not be required to pay IGST again in lieu of such GST payments already made. 5.2 With effect from 1 st October, 2019, the borrower of securities shall be liable to discharge GST as per Sl. No 16 of Notification (22/2019) No. FD 48 CSL 2017 dated 30.09.2019 under reverse charge mechanism (RCM). The nature of GST to be paid shall be IGST under RCM. 6. Difficulty if any, in the implementation of this circular may be brought to the notice of this office. (SRIKAR M.S.) Commissioner of Commercial Taxes (Karnataka) Bengaluru - Circular - Trade Notice - Public Notice - Instructions - Office orders Tax Management India - taxmanagementindia - taxmanagement - tax .....

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