The proposed model of goods and services tax (GST), which has included ‘securities’ in the definition of goods, has raised serious concerns on whether transactions in securities would attract GST or would be subject to an additional tax.

According to tax experts, the government needs to improve the proposed definition and exclude securities from the definition of ‘goods’.

Currently, share transaction attracts securities transaction tax (STT) and Krishi Kalyan cess and Swachh Bharat cess, apart from exchange transaction charges, stamp duty, clearing member charges and Securities and Exchange Board of India turnover charges.

While the current model gives no clarity that securities would come under the ambit of the GST, the government’s intent might not be to introduce yet another tax over and above STT of 0.1 per cent on delivery-based trades.

“Technically, the government cannot tax transaction in securities as it falls under direct tax but if it does happen, the whole stock market will crash down. Meanwhile, if you see the range of proposed tax rate which is up to 28 per cent — it’s impossible to implement it on securities,” said Sumit Lunker, executive director (tax and regulatory services) at PwC.

He added that in the indirect tax legislation scenario, securities being considered as activity of sale and purchase and has never been subjected to any service tax and value added tax. So, one cannot treat securities at par with normal goods and services used in the normal course.

Another controversy that might rise is on central and state governments’ revenue. “Let us assume certain securities traded at the stock exchange in Mumbai. But, sellers and buyers are in different states while the servers are at various locations. Under such circumstance, which state will get revenue is an issue that needs to be addressed,” he added.

Other section of experts, though, agree with the current interpretation of law. “From state governments’ perspective, they would want direct access to taxpayers’ data as opposed to waiting for the Centre to perform assessments and verifications and trust the Centre to allocate funds to the state. If securities are taxed as goods, it allows the government to track its trading more efficiently under GST. Else, they would have to build a complex place of supply rules for capturing all the various activities around trade in securities,” said Amit Kumar Sarkar, partner, Grant Thornton India.