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GST for Traders - Do they need GST Registration?

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Sakshi Shah

Aggregate Turnover
GST Registration
Trading Income
Trading Turnover
Last updated on April 2nd, 2021


GST is applicable if the aggregate turnover of a business exceeds the threshold limit. Once the business is registered under GST, it must charge GST on the sale of goods or services. It is applicable to manufacturers, traders and service providers. Does GST apply to stock traders also? The applicability of GST to trading in securities is a confusing question prevalent amongst traders. GST is not applicable to income from trading in stocks, shares, mutual funds, futures, options etc. Let us understand in detail.

Does having GST for Traders have any benefit?

What is recommended - having GSTIN and filing both GST and ITR or just simply file ITR no need of GST?

Does having GST for Traders have any benefit?

What is recommended - having GSTIN and filing both GST and ITR or just simply file ITR no need of GST?

Is GST applicable to Securities Traders?

It is mandatory to register under GST if the Aggregate Turnover exceeds the threshold limit of INR 40 Lakh (INR 20 Lakh for special category states) for sale of goods or INR 20 Lakh (INR 10 Lakh for special category states) for sale of services. As per Section 22 of CGST Act, Aggregate Turnover is the total sales value of taxable/exempt goods or services.

The GST Act specifically excludes Securities from the definition of Goods. As per Section 2(52), Goods means any movable property except money and securities. The definition of Services means anything other than goods, money and securities. Thus, trading in shares and securities is not considered as supply as per the GST Act and falls outside the purview of GST. Therefore, securities traders are not liable to register under GST.

However, it must be noted that if a broker is earning brokerage income from securities trading, GST registration is mandatory if such brokerage exceeds the threshold limit.

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Should I include Trading Turnover in Aggregate Turnover?

Trading Turnover is the turnover calculated for each trading segment as per the reporting requirements of the Income Tax Act.

Aggregate Turnover includes the sum of the sale of goods and services. Since the definition of goods and services excludes securities, the aggregate turnover should not include trading turnover to determine the applicability of GST Registration.

Trading Expenses on Securities Trading

Expenses incurred on trading in securities also includes CGST, SGST or IGST. This is the GST on expenses such as brokerage, transaction costs, turnover fees, etc that the trader pays for trading transactions. The trader can claim such expenses against the profit/loss from trading while filing the Income Tax Return on the income tax website.

GST for Traders – Reporting in ITR-3

Turnover as per ITR must match with sales reported in GST Return to avoid any mismatch notice. If the trader does not have GST Registration, he/she need not report details of GSTIN in the Income Tax Return. If the trader has income from any business other than securities trading and has GST Registration, it is advisable to report the trading turnover from securities trading under Non-GST Supply in the GST Return.

FAQs

Does securities also cover derivatives?

The GST Act excludes Securities from the definition of Goods. Securities shall have the same meaning as per Section 2 of Securities Contracts (Regulation) Act, 1956 and includes shares, scrips, stocks, bonds, debentures, debenture stock, other marketable securities and derivatives.

Is GST applicable on brokerage earned in Stock broking services?

Yes. A stockbroker provides stockbroking services that fall under the definition of ‘Services’ under GST. Therefore, such sale value must be included in Aggregate Turnover to determine the applicability of GST Registration.

My trading turnover from share trading exceeds INR 40 lacs. Do I need to register under GST?

Trading in securities does not fall under GST since the definition of ‘Goods’ and ‘Services’ as per the GST Act excludes securities. Therefore, even if the trading turnover exceeds the threshold limit, GST is not applicable.

Got Questions? Ask Away!

  1. Hi @Saurabh_Ghosh

    1. The treatment of income from the trading activity will remain the same irrespective of company account or individual account. They are classified under the same income heads such as capital gains or business/profession and taxes are calculated accordingly.
      If your turnover is less INR 400 cr then the Income Tax slab rate is 25% for companies. For Individuals, the income tax liability is taxed at the applicable slab rates.
    1. To claim GST ITC, you need to have a GST registration and need to file a GST return. However, when filing your Income Tax Return, you can claim expenses directly related to your trading activity like electricity bills, internet expenses, etc.
      Keep in mind, if you are claiming GST ITC you cannot claim the GST amount in your expense.
      For eg: if the electricity bill is INR 1180 (180 being GST), and you are claiming the ITC on INR 180, you claim only INR 1000 as an expense when filing your ITR. In case you do not have GST registration, you can claim the total of INR 1180 when filing the ITR.
  2. @Saurabh_Ghosh,

    The GST Act specifically excludes Securities from the definition of Goods. So there is no requirement for traders to have GST registration.
    The GST paid on trading expenses such as brokerage, transaction costs, turnover fees, etc can still be claimed as an expense when filing the ITR.

  3. @Saurabh_Ghosh

    Since GST ITC claimed can only be used when you have GST liability. So it might make sense for a trader to claim ITC along with other expenses when filing the ITR.

    However, if you have GST payable then you can claim the ITC credit against that liability.

  4. @Saurabh_Ghosh,

    Right.
    Also, since Capital Market traders are not required to have GST registration.

  5. Hi @Saurabh_Ghosh,

    Unlike, F&O and intraday trading which are classified as business activity for income tax purposes, you cannot claim expenses like brokerage, internet expenses, legal and professional fees, etc for short-term and long-term capital gains. But an investor can claim, any transfer expenses except STT like brokerage, stamp duty, etc for capital gains, when filing ITR.

    However, the Income Tax Act has defined the particular sections under which exemptions can be claimed on capital gains earned. The intention of the exemption is to allow the taxpayer to invest in a new Capital Asset within a specified time limit without any tax burden.

  6. @Saurabh_Ghosh,

    There has always been this question and a debate around the treatment of gains from equity shares as business income or capital gains.
    The answer is derived from the taxpayer’s intent of the transaction. Here’s an article discussing when to treat the sale of shares as Capital Gains or Business Income

  7. Hi @Saurabh_Ghosh

    As per the clarification issued by CBDT, it is at the discretion of the assessee to treat Equity share trading as Business Income or Capital Gains.
    The only condition is to follow the same method continuously in subsequent years as well. The taxpayer shall not be allowed to adopt a contrary approach in subsequent years.

    After filing of ITR, you just need to wait for IT Department to process your ITR. You don’t need to give any confirmation letters or documents. However, if the IT Department asks for any clarifications, in that case, you need to submit a response by mentioning your intent and reasoning for the treatment.

    Hope this helps :slightly_smiling_face:

  8. Hi @Tamil_143

    You can claim all the expenses that are directly related to trading. So if these expenses are incurred while doing trading activities you can claim the same.
    So if you are working/trading from home and incurred such expenses you can proportionately claim the expenses. However, the onus is on you to prove that the expenses were incurred for the business/trading when asked by IT Department.

    You can refer to the below article for a detailed list of expenses you can claim.

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