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TMI BlogClarification regarding taxability of supply of securities under Securities Lending Scheme, 1997.X X X X Extracts X X X X X X X X Extracts X X X X ..... es 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 recognised stock exchange in India. There is anonymity between the lender and borrower since there is no direct agreement between them. 2.1 The lenders earn lending fee for lending their secur ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... rities as defined in clause (h) of section 2 of the Securities Contracts (Regulation) Act, 1956 are not covered in the definition of goods under section 2(52) and services under section 2(102) of the GGST Act. Therefore, a transaction in securities which involves disposal of securities is not a supply in GST and hence not taxable. 4.1 The explanation added to the definition of services w.e.f. 01.02.2019 i.e. includes facilitating or arranging transactions in securities is only clarificatory in nature and does not have any bearing on the taxability of the services under discussion (lending of securities) in past since 01.07.2017 but relates to facilitating or arranging transactions in securities. 4.2 The activity of len ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... r has already paid CGST / GGST treating the supply as an intra-state supply, such lenders 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 SI. No 16 of Notification No. 22/2019-State Tax (Rate) 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 implementation of this Circular may please be brought to the notice of the Chief Commissioner of State tax. 7. This circular shall be deemed to have been issued on the 11 th October, 2019. (Milind Torawane) Chief Commissione ..... X X X X Extracts X X X X X X X X Extracts X X X X
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