What are the GST Compliances of an Authorised Partner?

As the Goods and Services Act, 2017, mandates taxes on several services, Authorised Partners are also liable to pay GST. Similar to brokerages and other intermediaries in the stock broking ecosystem, Authorised Partners fall under GST rules.

Authorised Partners don’t execute trades for clients on their own but guide investors on behalf of brokerages. They work under brokerage houses, which makes them subject to GST. Authorised Partners are considered agents as defined under Section 2(5) of the CGST Act. As Authorised Partners are required to pay GST on their earnings, the first step for them is to register under the provisions of compulsory registration as defined in the GST Act, 2017.

Over the last few years, Authorised Partnership has emerged as an attractive career option. Before diving into an Authorised Partnership business, it is important to understand how GST applies to stock broking services.

Authorised Partner Acts as an Agent

SEBI’s Stock Brokers and Sub Brokers Regulation, 1992, defines an Authorised Partner as a “person who is not a member of a stock exchange, and acts on behalf of a stock broker as an agent or otherwise for assisting investors in buying, selling, or dealing in securities through such stock brokers.”

Authorised Partners function as intermediaries or as a bridge between a broking firm and a client, providing services to both. By providing services to both, they meet the criteria of an agent, as per Section 2(5) of the GST Act, 2017. In this case, they must register under Section 24(vii) of the GST Act, 2017.

If the Authorised Partner does not provide any service to clients, then he or she is not considered an agent, as per GST norms. Currently, for Authorised Partners, the GST rate stands at 18% (SGST 9% and CGST 9%).

GST Compliance for Authorised Partners

Authorised Partners are liable to pay GST as per rules, as they qualify as agents who provide stock broking services and receive commissions. They have to follow the GST compliance guidelines, which undergo revisions. There are three key categories: (1) compliance with tax invoices, (2) compliance with GST return filing, and (3) compliance with GST registration.

Key Compliance Factors to Keep in Mind

• Authorised Partners must raise an invoice to their main brokerage firm for the GST amount at the end of every month
• As per rules, brokerage earned in stock broking services is liable to GST
• Any interest, delayed payment, settlement obligations and margin trading facility are taxable under GST paid by stock brokers
• When an Authorised Partner provides services to both clients and brokerage firms, he works as an agent as provided in Section 2(5) of the CGST Act. In this scenario, he must compulsorily register without the threshold under Section 24(vii) of the CGST Act, 2017
• If an Authorised Partner does not provide any service to clients on behalf of the stock broker, then he does not fall under the definition of “agent” under the CGST Act, 2017