Gst – Share Market

GST is a uniform tax charged on the final value of goods and services consumed by ultimate consumers. France is the first country that implemented GST in 1954 for the first time in its economy. More than 140 companies are following the GST. The share market is a great source of finance for companies and derivation of income from the individuals. The rate of GST on the share market is 18 % combining 9 % CGST and 9% SGST. GST is charged on both types of share market as a secondary market and  primary market. It is a requisite source of finance for companies listed on stock exchange.

Share market: Definition 

Share market is a vital tool for ensuring stable capital for the companies. It is a place where shares and securities of various public and private companies are traded through stock exchange. Investors can hold shares for a longer time and sell them when the prices of the securities increase. The investors are considered as the shareholders of the company and included in owners. There are two major stock exchanges BSE (Bombay stock exchange) and NSE (National Stock Exchange). Share market deals with equity, stocks, securities that are traded with the stock exchange. Intermediaries in the share market between investors and companies are termed as share transfer agents, registrars, merchant bankers, underwriters, credit rating agencies, custodians and others.

GST – share market  

Continuous growth in the globalisation market, enhancement of the dynamic business environment has led to the expansion and diversification of the companies. It has increased awareness among investors that are shifting from land or gold to the share market. Concerning the issue, the government has introduced GST taxation on the securities and stocks of the company. In the case of multinational companies, expansion requires a huge amount of capital and finance. Issue of securities in the form of equity shares, preference share and debt are some of the major sources of finance. The growing demand for equities has captured the attention of tax regulators. Currently, there is an 18 % GST charged on the trading of securities in the share market. Along with GST security transaction tax (STT) is also charged which is 0.1 %. on the value of a transaction, based on the delivery of the securities. The profit from the investment from shares is considered as LTCG (Long term capital gain) or STCG (Short term capital gain).

Share Market classification 

Classification of the share market is based on the place of trading, types of securities and mode of delivery. Two types of share market can be further categorised as the primary market and secondary market. The primary market is the part of the capital market where the companies issue the securities for the first time by the initial public offer (IPO). The company issues new securities that were not traded previously. The secondary market includes trading of shares that are already issued. The transaction of the securities in the share market is done between investors. Categorising the shares based on types includes ordinary shares, equity shares, preference shares, redeemable shares. In addition to the delivery of shares, the share market can be further categorised as a physical market or virtual market.

Impact of GST on finance 

• GST is a uniform based tax and combines various taxes in one frame. It has made it easier for the business to adopt cumulative accounting thereby saving much time.
• In context to the Finance of the company, GST requires payment of taxes by the investors on investing, however, companies have to pay tax on the dividend to the shareholders. 
• The tax rate is fixed on dividends that assist the companies to forecast the financial requirements and take capital-based decisions.

Conclusion 

GST is the charge on the goods and services being consumed by the consumers. However, GST on securities is an important segment to discuss. Increasing demands for investment in the securities market has attracted the attention of authorities. In the current study, the aspects of the share market and the impact of the GST rate on securities is discussed. Furthermore, the share market categorization, which is a key ingredient in trading, has been briefly discussed. GST has a huge impact in taking the finance-related decisions of a business. The factors describing such decisions have also been discussed.