GST for Traders - Do they need GST Registration?

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Sakshi Shah

Aggregate Turnover
GST Registration
Trading Income
Trading Turnover


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.

Is GST applicable to Securities Traders?

It is mandatory to register under GST if the Aggregate Turnover exceeds the threshold limit of 40 lacs (20 lacs for special category states) for sale of goods or 20 lacs (10 lacs 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.

Calculate Aggregate Turnover under GST
To check applicability of GST Registration or to avail benefit of Composition Scheme, refer steps to calculate Aggregate Turnover under GST
Read More
Calculate Aggregate Turnover under GST
To check applicability of GST Registration or to avail benefit of Composition Scheme, refer steps to calculate Aggregate Turnover under GST
Read More

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.

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