The Hon’ble AAAR, Uttar Pradesh in the matter of SPFL Securities Ltd. [Order No. 06/AAAR/18/4/2019, dated April 18, 2019] held that Goods and Services Tax (GST) is not liable to be paid on delayed payment charges recovered from the client towards trading of securities upon payment made by them beyond the time stipulated by the stock exchange and SEBI and for which payment is deducted by the stock exchange from the broker’s account.
M/s. SPFL Securities Limited (the Appellant) is engaged primarily in the business of providing service of stock broking i.e., purchasing and selling of shares on behalf of the clients on exchange platform by virtue of being a recognized BSE/NSE appointed stock broker.
The Appellant submitted application for Advance Ruling dated October 20, 2018, before the Hon’ble AAR, Uttar Pradesh for taxability on delayed payment charges on reimbursement of amount by client to Appellant, where client failed to pay amount paid to Stock Exchanges for purchase of securities with T+1 (trading day plus one day) under SEBI Regulation norms and the amount was deducted by Stock Exchanges from the Appellant’s account being purchase consideration of securities which are neither goods nor service under GST. Whereas, the Hon’ble AAR, Uttar Pradesh vide Advance Ruling Order No. 18, dated December 14, 2018 held that Appellant is liable to pay GST on the delayed payment of charges which are overdue from the client towards trading of securities and reimbursed to them.
Being aggrieved with the abovementioned Order, this appeal application has been filed.
Whether GST is payable on delayed payment charges collected by Appellant if a client makes delay in reimbursing the expense to the Appellant and the Appellant charges a certain amount on delay of such reimbursement of expense, for securities purchased for the client?
The Hon’ble AAAR, Uttar Pradesh in Order No. 06/AAAR/18/4/2019, dated April 18, 2019 held as under:
Section 2(52) of the CGST Act:
“’goods’ means every kind of movable property other than money and securities but includes actionable claim, growing crops, grass and things attached to or forming part of the land which are agreed to be served before Supply or under a contract of supply;”
Section 2(102) of the CGST Act:
“’services’ means anything other than goods, money and securities but includes activities relating to the use of money or its conversion by cash or by any other mode, from one form, currency or denomination, to another form, currency or denomination for which a separate consideration is charged;
Explanation. – for the removal of doubts, it is hereby clarified that the expression “services” includes facilitating or arranging transactions in securities;”
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