Whether a ‘derivative’ is included within the meaning of ‘securities’ in Section 2(101) of CGST Act, 2017 and whether derivatives are liable to GST?
Section 2(101) of the CGST Act, 2017 provides that ‘securities’ shall have the same meaning as assigned to it in clause (h) of section 2 of the Securities Contracts (Regulation) Act, 1956 (SCRA). ‘Derivatives’ are included in the definition of ‘securities’ under section 2(h)(ia) of the SCRA. In terms of section 2(ac) of SCRA, “derivative” includes—
(A) a security derived from a debt instrument, share, loan, whether secured or unsecured, risk instrument or contract for differences or any other form of security;
(B) a contract which derives its value from the prices, or index of prices, of underlying securities.
The definition of ‘derivatives’ in SCRA is an inclusive definition. As ‘derivatives’ fall in the definition of securities, they are not liable to GST.
However, if some service charges or service fees or documentation fees or broking charges or such like fees or charges are charged, the same would be a consideration for provision of service and chargeable to GST.