CBIC clarifies on taxability of supply of securities under Securities Lending Scheme, 1997

Oct 15, 2019 | by Avantis RegTech Legal Research Team


The Central Board of Indirect Taxes and Customs (CBIC) on October 11, 2019, has clarified the issue regarding taxability of supply of securities under Securities Lending Scheme, 1997.

However, Securities and Exchange Board of India (SEBI) has prescribed the Securities Lending Scheme, 1997 for the purpose of facilitating lending and borrowing of securities. Under the Scheme, lender of securities lends to a borrower through an approved intermediary to a borrower under an agreement for a specified period with the condition that the borrower will return equivalent securities of the same type or class at the end of the specified period along with the corporate benefits accruing on the securities borrowed.

The lender temporarily lends the securities held by him to a borrower and charges lending fee for the same from the borrower. The borrower of securities can further sell or buy these securities and is required to return the lended securities after stipulated period of time. The lending fee charged from the borrowers of securities has the character of consideration and this activity is taxable in GST since July 01, 2017.

Further, the activities of the intermediaries facilitating lending and borrowing of securities for commission or fee are also taxable separately.

The supply of lending of securities under the scheme is classifiable under heading 997119 and is leviable to GST@18% under Sl. No. 15(vii) of Notification No. 11/2017- Central Tax (Rate) dated June 28, 2017.

For the past period i.e. from July 01, 2017 to September 30, 2019, GST is payable under forward charge by the lender and request may be made by the lender (supplier) to SEBI to disclose the information about borrower for discharging GST under forward charge and if the service provider has already paid CGST / SGST / UTGST, such lenders will not be required to pay IGST again in lieu of such GST payments already made.

Further, with effect from October 01, 2019, the borrower of securities will be liable to discharge GST as per Sl. No 16 of Notification No. 22/2019-Central Tax (Rate) dated September 30, 2019 under reverse charge mechanism (RCM).

[Circular No. 119/38/2019-GST]


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