Worried about GST? Need not atleast for your Stock Market Trading

Nutan Gupta Nutan Gupta 24th August 2023 - 12:42 pm

Goods and Service Tax (GST) is all set to roll out from July 1 onwards. There has been a lot of discussion about the tax implications that GST will have on various sectors. Under GST, the tax on financial services transactions will rise from the current 15% to 18%. Financial service transactions include banking, mutual funds, insurance and stock broking.

Though this will impact a lot of traders and investors around the country, clients who have an account with 5paisa.com need not worry about the same. This is where the advantage of trading with 5paisa.com comes in. A discount broker like us do not charge brokerage. Clients pay a flat fee irrespective of the Turnover. As brokerage is extremely less, the impact of GST which will replace Service Tax will also be miniscule.

Let’s have a look on how the implementation of GST rate will impact –

A trader, and

An investor

Trader

A trader trades very frequently and hence any change in the tax rate would have a major impact on his profit. However, if one is trading with us as the brokerage itself is very less, the change in GST rate of 15% to 18% will hardly impact.

Impact of GST on a Trader
5paisa		10 lot of Nifty Futures	Traditional Broker
Prior to GST (15%)	Post GST (18%)		Prior to GST (15%)	Post GST (18%)
Buy Nifty @9600 & Sell@9700	Buy Nifty @9600 & Sell Nifty@9700		Buy Nifty @9600 & Sell@9700	Buy Nifty @9600 & Sell@9700
Rs 1,44,75,000	Rs 1,44,75,000	Amount of trade	Rs 1,44,75,000	Rs 1,44,75,000
Rs 20	Rs 20	Brokerage	Rs 14475	Rs 14475
Rs 3	Rs 3.6	Applicable Taxes	Rs 2171.25	Rs 2605.5
Rs 23	Rs 23.6	Total Cost	Rs 16646.25	Rs 17080.5

The above table the shows the difference in brokerage a trader has to pay when he does F&O with a discount broker and traditional broker. If you trade with 5paisa.com, the extra tax after GST that you have to pay is just 60 paisa, while with a traditional broker it is Rs 434.25, which is 723 times higher.

The total cost of your brokerage is way too higher when you trade with a traditional broker.

Investor

An investor is the one who invests in the market with a long-term horizon. Though he may think that it is a one-time charge, the fact is that higher GST can eat into the profits. On the other hand, if one invests with a discount broker, majority chunk of your profit of your profit can be saved.

Impact of GST on an Investor
5paisa		An investors buys a portfolio worth Rs 1 lakh	Traditional Broker
Prior to GST (15%)	Post GST (18%)		Prior to GST (15%)	Post GST (18%)
Buy@1 lakh & Sell@Rs 1.5 lakh	Buy@1 lakh & Sell@Rs 1.5 lakh		Buy@1 lakh & Sell@Rs 1.5 lakh	Buy@1 lakh & Sell@Rs 1.5 lakh
Rs 250000	Rs 250000	Amount of trade	Rs 250000	Rs 250000
Rs 20	Rs 20	Brokerage	Rs 750	Rs 750
Rs 3	Rs 3.6	Applicable Taxes	Rs 112.5	Rs 135
Rs 23	Rs 23.6	Total Cost	Rs 862.5	Rs 885
Total expenses increase by 60 paisa only			Total expenses increased by Rs 22.5

The above table shows the difference in brokerage when an individual investor buys a portfolio with a discount broker and when he buys it with a traditional broker. The total tax that an investor pays after GST is just 60 paisa more, while it is 30 times more with a traditional broker.

So, if you want to beat the increase in your tax outflow because of GST, switch to 5paisa.com