Summary: The purchase and sale of securities involve various charges and taxes, some of which attract Goods and Services Tax (GST) while others do not. Stockbrokers like Zerodha, Groww, and Upstox levy GST on several components, including brokerage fees, exchange transaction charges, Investor Protection Fund charges, SEBI turnover fees, depository participant charges (on selling securities), annual maintenance charges for Demat accounts, and clearing charges. These are considered taxable services provided by the broker. However, certain charges are exempt from GST as the broker acts as a pure agent, simply remitting the full amount to the respective authorities without retaining any margin. This includes Securities Transaction Tax (STT) and Stamp Duty, which are government levies. Additionally, interest charged on margin funding, where a trader borrows money from a broker, is also an exempt service under GST. A contract note details these charges, showing GST applicability on items like brokerage, transaction charges, and SEBI turnover fees, while explicitly excluding STT and Stamp Duty from GST calculations. DP charges, while subject to GST, are typically deducted separately and may not appear on the contract note itself.
Here we will understand the charges on which GST levied by these stock brokers & charges on which no GST levied.
| Sr. No. | Particulars | Explanation | GST applicability |
| 1. | Brokerage | GST levied by the stock broker on the brokerage fees | Yes |
| 2. | Exchange transaction charges | GST levied by the stock broker on the exchange transaction charges. It is imposed by the stock exchange i.e NSE or BSE. | Yes |
| 3. | Investor Protection Fund charges | GST levied by the stock broker on the Investor Protection Fund charges. These charges are levied to ensure the safety of investor’s funds. | Yes |
| 4. | SEBI turnover fees | GST levied by the stock broker on the SEBI turnover fees. It is charged by SEBI. | Yes |
| 5. | Securities transaction tax | No GST is levied by the stock broker on the Securities transaction tax because it is a pure reimbursement. The full amount is remitted to the concerned authorities by the stock broker without retaining any margin. Therefore, GST is not applicable on STT, as the stock broker acts as a pure agent in this case. STT is the income of government. | No |
| 6. | Stamp Duty | No GST is levied by the stock broker on the Stamp Duty because it is a pure reimbursement. GST is not applicable on Stamp Duty, as the stock broker acts as a pure agent in this case. | No |
| 7. | Depository Participant charges | GST levied by the stock broker on the Depository Participant charges. It is charged at the time of selling of securities not at the time of buying. It is levied by NSDL or CDSL. | Yes |
| 8. | Annual Maintenance charges | GST levied by the stock broker on the Annual Maintenance charges, as these charges are collected for maintenance of Demat account. | Yes |
| 9. | Clearing charges | GST levied by the stock broker on the clearing charges. It is charged by the clearing agent. | Yes |
| 10. | Interest on margin funding | When a trader borrows money from a broker to trade in securities, the interest charged by the broker for providing the funds is considered an exempt service under GST. | No |
This is a screenshot of purchase contract note taken from Zerodha. In this, we will understand which charges or taxes are subject to GST & which are not:-
Below, I am providing a simplified explanation of the above contract note:-
| S. No. | Particulars | Amt. | GST |
| 1 | Brokerage | 0.01 | GST is applicable on it |
| 2 | Transaction charges cum IPF | 1.13 | GST is applicable on it |
| 3 | SEBI turnover fees | 0.03 | GST is applicable on it |
| 4 | Clearing charges | – | GST is applicable on it |
| 5 | Taxable value under GST | 1.17 | |
| 6 | GST @18% | 0.21 | |
| 7 | STT | 30.00 | No GST is applicable on it |
| 8 | Stamp Duty | – | No GST is applicable on it |
| 9 | Invoice value | 31.38 |
DP charges are directly deducted from the balance in shares application. It is not reflected in the contract note.
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Disclaimer: The views in this article are those of the author and do not reflect any official policy. It is for general information only and not professional advice. While efforts were made for accuracy, no guarantees are given. Readers should consult a qualified professional before making financial, legal, or tax decisions. The author is not liable for any loss or damage from using this information.
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Its a very well explanation with this article.
Thank you, Shubham, for the kind compliment.