GST compliances and registration requirements to Sub Brokers / Mutual Fund Agents:

Sec. 24. Compulsory registration in certain cases

(1) Notwithstanding anything contained in sub-section (1) of section 22, the following categories of persons shall be required to be registered under this Act, ––

(vii) persons who make taxable supply of goods or services or both on behalf of other taxable persons whether as an agent or otherwise;

Accordingly any person acting as an intermediary requires compulsory registration under the above referred provision. And once a person is registered under GST he is required to make all the compliances including collection and payment of GST.

Further recently CBIC released FAQs on Banking and Financial Service sectors. The question No. 83 of the same reproduced herein below:

Q:

Would sub-brokers/ Authorized Persons fall in the definition of “agent” under Section 2(5) of the CGST Act, 2017? What would be the registration requirement for subbrokers / Authorized Persons in the context of the Goods and Services Tax Regime?

Ans:

As per Stock Brokers and Sub Brokers Regulation, 1992 issued by SEBI, a “sub broker” means “any person, not being a member of stock exchange, who acts on behalf of a stock broker as an agent or otherwise for assisting the investors in buying, selling or dealing in securities through such stock brokers”. It is, therefore, apparent that the sub broker may not only be providing services to the stock broker but may also be providing services to the clients and receiving consideration from both. Thus, in such a scenario where the sub broker is providing services both to the broker and the investor on behalf of the broker, he would be duly covered by the definition of ”agent” as provided in Section 2(5) of the CGST Act, and needs to compulsorily register without the threshold under Section 24(vii) of the CGST Act, 2017.

The above makes it clear that any person acting as such intermediary by whatever name called requires compulsory registration and requires to make all the compliances under GST.

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6 Comments

  1. Ralph Barros says:

    Sir,
    Does the exemption Limit of Rs 20 lacs and also the notice dated OCt 2017 stating that iner-state supply of services below Rs 20 lacs T.O are exempted from GSt registration not apply to sub brokers and Mutual fund agents ?

  2. ARVIND KUMAR MITTAL says:

    To my understanding the individual mutual fund distributors are exempted for GST REGISTRATION IF their turnover is less than 20 Lakh till sep.2019 in recent GST . Is it right?

    1. Ralph Barros says:

      This cud have been an Oversight on the GST Comitte but account to the GST commissioner the Rs 20 lacs exemtion is covered under all service including inter-state services

  3. Dhirenkumar Gandhi says:

    Looking to the provisions of section 24, it is clear that if a sub broker provides services to a TAXABLE PERSON, then he will be liable for registration. But if the clients of a certain sub-broker are not TAXABLE PERSONS, then what could be legal position? SAY, all clients are retired, non business class or salaried persons. In such case, whether that sub-broker is liable for registration..

    1. dpsodha says:

      It makes no difference as the sub broker is providing service as an agent to main broker. He is acting as an intermediary so will be covered by the provision of Sec. 24(vii)

      1. Shankutala says:

        In My opinion if the sub-brokers do not provide any service to the clients / investor on behalf of stock broker (for example referral commission only), then the said sub-brokers would not fall in the definition of “agent” under the CGST Act, 2017 and provisions of GST would be made applicable accordingly. There are no more sub brokers only authorised persons and A.P’s receive referral commission only. Hence the 20 lacs exemption applies to all A.P’s .

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