Page 6 - Chapter 2.cdr

CCP 02.05.09.00 (2) Interest for delay payment of consideration (i.e. interest from debtors,
Vikramaditya is a salaried employee and is planning to invest in stocks. He has receivables)
CH 2 opened a trading account with Vaydaa Brokers. During the month, Vikramaditya Interest on loan advances or deposit is subject to exemption but any interest,
undertook future contracts (without a physical delivery option, but are cash late fee or penalty for delay payment of consideration is liable to GST.
Charge of Tax & Concept of Supply
settled on the expiry of the contract date), amounting to ` 35,00,000.
Vikramaditya needs your advice whether such future contracts undertaken by CCP 02.05.11.00
him amount to supply and are liable to GST.[ICAI Material]
Rob Shareholding Ltd., an approved intermediary, has entered into a transaction
Answer- For a transaction to fall within the purview of supply, it must be a supply of
wherein certain securities were to be lent to Dhandhan Bank, under Securities
either goods or services or both.
Lending Scheme, 1997. Dhandhan Bank shall pay specified lending fee against
The definitions of the terms “goods” and “services” specifically exclude
such lending of securities to it. Explain the taxability of transactions involved in
“securities” from their purview. the Securities Lending Scheme, 1997.[ICAI Material]
Further, ‘derivatives’ are included in the definition of ‘securities’. As Answer- Securities Lending Scheme, 1997 (hereafter referred to as SLS) facilitates

‘derivatives’ fall in the definition of securities, they are neither goods nor services and the lending and borrowing of securities. Securities are neither covered in the
hence, are not liable to GST. definition of goods nor covered in the definition of services.
Future contracts are in the nature of financial derivatives, the price of which Therefore, a transaction in securities which involves disposal of securities is
is dependent on the value of underlying stocks or index of stocks or certain approved not a supply in GST and hence not taxable.
currencies and the settlement happens normally by way of net settlement with no However, SLS doesn’t treat lending of securities as disposal of securities and
actual delivery. therefore is not excluded from the definition of services. The lending fee charged from

Since future contracts are in the nature of derivatives, these qualify as ‘securities’ the borrowers of securities has the character of consideration and is taxable under
and thus, are not subject to GST. GST.
In view of the above discussion, it can be inferred that since the future contracts Apart from above, the activities of the intermediaries facilitating lending and
undertaken by Vikramaditya are in the nature of derivatives, these qualify as borrowing of securities for commission or fee are also taxable separately [Circular No.

‘securities’ and do not qualify as supply and thus, are not subject to GST. 119/38/2019 GST dated 11.10.2019].

CCP 02.05.10.00 06. Sec.2(17)- Business
Will GST be applicable on any interest charged for payment after the credit CCP 02.06.12.00

period? Define the term 'Business' under CGST Act.
Answer: As per sec 2(102) Service means anything other than goods, money or Answer: As per section 2(17) of CGST Act , 'business' includes-
securities. (a) any trade, commerce, manufacture, profession, vocation, adventure, wager or
Hence, Interest charged for the following activities are liable to GST: any other similar activity, whether or not it is for a pecuniary benefit
(1) Interest for use of money (i.e. loan, advances, deposits)
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