Mere hold of Securities of Subsidiary Company by holding Company not supply of Services; not taxable: Clarifies GST Council
The Union Finance Minister Nirmala Sitaraman presided over the 50th meeting of the GST Council on 11th July 2023 at Vigyan Bhawan in New Delhi including Revenue Secretary, CBIC chairman. The 50th GST Council meeting Clarified that mere holding of securities of a subsidiary company by a holding company cannot be treated as a supply of services and therefore, cannot be taxed under Goods...
The Union Finance Minister Nirmala Sitaraman presided over the 50th meeting of the GST Council on 11th July 2023 at Vigyan Bhawan in New Delhi including Revenue Secretary, CBIC chairman.
The 50th GST Council meeting Clarified that mere holding of securities of a subsidiary company by a holding company cannot be treated as a supply of services and therefore, cannot be taxed under Goods and Services Tax (GST).
The council has also stated that a circular will be issued subsequently to avoid the ambiguity and legal disputes on these issues.
In GST the term 'service' has been given the widest meaning possible. The definition reads "(102) "services" means anything other than goods, money and securities but includes activities relating to the use of money or its conversion by cash or by any other mode, from one form, currency or denomination, to another form, currency or denomination for which a separate consideration is charged;
Explanation — For the removal of doubts, it is hereby clarified that the expression "services" includes facilitating or arranging transactions in securities"
The exclusion of securities from the definition implies that they are not considered services and therefore do not fall within the scope of taxation. However, the GST council has provided clarification stating that the act of simply holding securities of subsidiary companies by a holding company does not qualify as the provision of services. As a result, it is not subject to taxation under the Goods and Services Tax (GST) system.
A subsidiary company refers to a company that is controlled or owned by another company, known as the parent company or holding company. The parent company typically holds a majority of the subsidiary's voting shares, giving it the power to influence the subsidiary's operations and decision-making.
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