2026-VIL-208-AAR
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SGST Advance Ruling Authority

GST – Karnataka AAR - Interest on Margin Trading Facility - Entry 27(a) of Notification No. 12/2017-Central Tax (Rate) - The Applicant, a brokerage company registered with SEBI, proposed to offer a Margin Trading Facility under which a client purchases shares by paying only part of the value, the balance is funded by the broker as a loan against pledged securities, and interest is charged per day on the funded amount from the day after the transaction until the position is cleared - Whether the interest charged to clients who avail the Margin Trading Facility is liable to GST - HELD - Money and securities are excluded from the definition of goods and from the definition of services. However, the definition of services includes activities relating to the use of money for which a separate consideration is charged. Under the facility, the Applicant provides funds to clients beyond the margin available and charges interest on the amount funded, so the consideration is for the use of money by the client for a specified period and the activity is a supply of service - Entry 27(a) of the exemption notification exempts services by way of extending deposits, loans or advances in so far as the consideration is represented by way of interest or discount. The Applicant funds a portion of the purchase consideration of securities, the client is required to repay the funded amount and pay interest for the period it remains outstanding, and the transaction possesses all the attributes of a loan or advance - The interest is independent of the brokerage charged for execution of trades and represents consideration for providing finance to the client. The interest charged by the Applicant for the Margin Trading Facility is exempt from GST under Entry 27(a) of Notification No. 12/2017-Central Tax (Rate) – Ordered accordingly
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