While the GST is not likely to cause major procedural disruption among equity market participants, brokers are in a mad rush to get their branches registered to avoid a shut-down on Monday.

Until now, service tax was charged on the brokerage fee, which even though collected via different branches was paid through the head office of the brokerage house. However, GST mandates that any tax collected by a specific branch in any State be deposited by it in the same State.

GST in the equity markets is applicable on the brokerage fee at 18 per cent and has to be deposited with the authority by the particular brokerage branch collecting it. Brokers said the online data system for GST registration too, had slowed down in the past few days due to the overload.

“We are all working late as it is a rush against time to get every branch registered in every State and get a GST number like PAN or Service Tax number that would help deposit the tax,” said Sudip Bandyopadhyay, Group Chairman, InditradeCapital. “Not many believed till a few weeks ago that the tax would be implemented from July 1 and now the deadline is here.”

GST is more of a hassle for the large brokerages having several branches across the country. Inditrade operates via 240-250 locations in 18 States. It means the broker requires 18 different GST registration numbers.

“GST for large equity brokers is nothing but de-centralisation of back-office operations in many aspects,” said Uttam Bagri, Chairman, BSE Brokers Forum.

Both Bandyopashyay and Bagri believe GST may increase compliance cost for brokers due to the de-centralisation process. “Many brokers are still confused about the billing process and are trying to put that in place,” said Shailesh Sheth, founder, SPS Legal, who has been advising financial services firms in Mumbai. “Confusion is over how billing should be done to clients on delayed payment changes. There is no clarity on levy of GST on penalty by stock exchanges and clearing houses.”

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