GST Clarification on Securities Lending Scheme 1997
<p>The Ministry of Finance, through Circular No. 119/38/2019-GST, has clarified the taxability of securities lending under the Securities Lending Scheme, 1997. This circular provides clarity on the GST implications of lending securities and the associated lending fee.</p><p><strong>Key Highlights:</strong></p><ul><li><strong>Securities Lending Taxability:</strong> Under the Securities Lending Scheme, 1997, the lender earns a lending fee for lending securities to a borrower. The transaction itself is not considered a supply of goods or services, and lending securities temporarily does not involve disposal of securities. However, the lending fee is taxable under GST.</li><li><strong>GST on Lending Fee:</strong> Since July 1, 2017, the lending fee charged by the lender to the borrower is considered taxable under GST. The supply of lending securities falls under heading 997119 and is subject to an 18% GST rate.</li><li><strong>Forward Charge and Reverse Charge Mechanism (RCM):</strong> For the period from July 1, 2017, to September 30, 2019, the lender is required to pay GST under forward charge. From October 1, 2019, the borrower is responsible for discharging GST under the reverse charge mechanism (RCM) at an 18% rate.</li><li><strong>GST Classification:</strong> The lending activity is classified under GST heading 997119, and the GST rate for the lending fee is 18%. The activity is taxable from the date GST was implemented, with the shift in responsibility for GST payment to the borrower after October 2019.</li></ul><p>This clarification ensures that lenders and borrowers are aware of their GST obligations and provides clear guidelines for tax compliance in securities lending transactions.</p><p><a href="https://cms.plasament.com/storage/chirag-singla/circular-cgst-119.pdf">circular-cgst-119</a><br> </p>