Depository Participants (DPs) provide demat account services to investors, including holding securities, facilitating trades, and maintaining account records. The charges levied by DPs for these services attract GST at 18%.
This article explains the GST treatment of DP charges and custody fees.
What are DP Charges?
DP charges are fees levied by the Depository Participant when securities are sold from a demat account. These charges typically range from ₹13 to ₹25 per transaction and include:
- Depository charges (NSDL or CDSL).
- DP's own markup.
GST on DP Charges
GST at 18% applies to DP charges. The DP must issue a GST-compliant invoice or debit note.
Annual Maintenance Charges (AMC)
AMC is the yearly fee charged by the DP for maintaining the demat account. It typically ranges from ₹0 to ₹700 per year, depending on the DP.
GST at 18% applies to AMC.
Account Opening Charges
Some DPs charge a one-time account opening fee, ranging from ₹0 to ₹850. GST at 18% applies to this fee.
Custody Fees
Custody fees are charged by custodians for holding and safekeeping securities on behalf of institutional investors. These fees attract GST at 18% .
ITC on DP Charges
Investors cannot claim ITC on GST paid for DP charges and AMC related to personal demat accounts. However, businesses holding securities as part of their business may be eligible for ITC.
Compliance for DPs
- Register for GST.
- Charge 18% GST on taxable services.
- Issue GST-compliant invoices.
- File GST returns on time.
- Maintain proper records.
Conclusion
DP charges, AMC, account opening fees, and custody fees attract GST at 18%. Investors must understand these charges to accurately account for their tax costs.
At Anuj Desai & Associates, we provide expert advisory services on GST for DPs and investors. Our team can help you navigate the complexities of GST on demat and custody charges.
For a confidential consultation, contact us at office@anujdesaiassociates.com or call 9619456656. Visit our website at https://anujdesaiassociates.com or connect with our founder on LinkedIn at linkedin.com/in/ca-anuj-desai-122547230.