GST – Stock exchange

The GST or goods and service tax is a federal value-added tax that is levied on various goods and products that are sold for domestic consumption. In this regard, the rate of CGST is 9% and SGST is 9%, overall 18% GST. Stock exchange levies on buying and selling transaction charges which are decided by the particular stock exchange. In India, SEBI charges the turnover fee of the transaction amount of 0.0002%.

Definition of stock exchange

Stock market

Stock markets are considered the venue where sellers and buyers meet for exchanging the equity share of the public corporation. For instance, if someone trades in the stock market, they sell or buy shares on one of the stock exchanges, which are a part of the overall stock market. 

Stock exchange

Stock exchanges are defined as the centralized location, as here the shares of companies, which are publicly traded, are sold and bought. Stock exchanges help companies to raise money or capital by creating equity shares for investors for sale. In New York, the broker is an active participant in trading stocks. For example, in India, companies that are listed in SEBI can take partin the stock exchange. 

Cost involvement in stock market investment

Share investment

On individual’ buying and selling the shares, transaction costs involved in it. Such costs are-

Brokerage: Stockbrokers levied the transaction amount by the investor, as the rate determines there on the value of contracts or agreements between parties. 

Securities transaction tax: The mandatory transaction is charged as a percentage of 0.1% levied, on securities, equities, futures and options for domestic stock exchange.

Stamp duty and Depository participant: State government makes these transactions, which involves the security transfer from one party to another.  

Capital gains: Depend on the holding period of tax, which is applicable on profits from sales of shares. 

Classification of stock exchange 

The stock classification can be based on various parameters and the voting rights of shareholders. Such parameters can be discussed below.

• Based on market capitalization

Large-cap:Stocks are often held by the blue-chip companies, which have large cash reserves, and have benefits to allow investors to reap high dividends from the small and mid-caps. 

Mid-cap: Companies that have a medium market capitalization in between 250 cr to 4000 cr

Small-cap: Companies, which are less than 250cr, were investors willing to commit long terms but not particular about recent dividends. 

• Based on ownership

Preferred and common:  Where companies have surplus money to distribute and which offer investors fixed dividend amounts.

Hybrid companies: That share common shares with certain conditions in a given time.

Embedded derived options: Companies can be ‘puttable’ or ‘callable’, and not available in general. 

• Based on dividend payment

Growth: Stocks pay low dividends and reinvest earnings for faster growth

Income: Stock creates high dividends, based on high incomes rated companies.

• Based on the risk

iBeta: Beta measures the risk by observing the price volatility of a stock, companies with beta value <1, have more stock volatility than the market. 

Blue-chip: Companies that have high earnings and low liability, and pay regular dividends. 

• Based on price trends

Defensive, stocks in unfazed and poor economic conditions, companies like food and beverages. 

Cynical companies are affected by economic conditions, where stock grows highly due to the boom cycle but after a slow economy, the stock declines too. 

GST – Stock exchange impact on capital market

GST generally creates three shifts in the capital market. The long-term investment over the short term investment can apply to mutual funds and equities. GST drives the investors from long term to short term investment. GST creates structural differences to logistics and distribution metrics in large companies, especially two-wheelers, automobiles, consumer durables, FMCG, as it creates the valuation shift. Lastly, GST can impact passive investment, such as portfolio performances, index funds and ETFs. 

GST on Stock exchange

The government is putting anti-profiteering, which is beneficial to the value chain. Corporates gain indirect benefits of the logistics costs from savings. For example, in India, the return also increased after implementing GST, especially for the multiple states business manufacturers, which give multiple returns every month. The UK and France had to decline their initial rates of GST for gaining more returns. 

Conclusion 

The consumer paid for GST, although it is sent to the government for business purchasing and selling the services and goods. For instance, In India, the GST is a destination-based tax, as the center (CGST), states (SCST) and union territories (UTGST) can levy it on the common tax bases. Depository participants have levied the charges for keeping the safe securities of the investors. Various stock classification measures the status of companies divided and the government’s revenue as well.