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Circular No. 196/08/2023-GST
F. No. CBIC-20001/5/2023-GST
Government of India
Ministry of Finance
(Department of Revenue)
Central Board of Indirect Taxes and Customs
GST Policy Wing
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New Delhi, Dated the 17
th
July, 2023
To,
The Principal Chief Commissioners/Chief Commissioners/Principal Commissioners/
Commissioners of Central Tax (All)
The Principal Directors General/ Directors General (All)
Madam/Sir,
Subject: Clarification on taxability of shares held in a subsidiary company by the
holding company.
Representations have been received from the trade and field formations seeking
clarification on certain issues whether the holding of shares in a subsidiary company by the
holding company will be treated as ‘supply of service’ under GST and will be taxed accordingly
or whether such transaction is not a supply.
2. In order to clarify the issue and to ensure uniformity in the implementation of the
provisions of law across the field formations, the Board, in exercise of its powers conferred
by section 168 (1) of the Central Goods and Services Tax Act, 2017 (hereinafter referred to as
“CGST Act”), hereby clarifies the issues as under:
S.
No.
Issue Clarification
Taxability of share capital held in subsidiary company by the parent company
1. Whether the activity of
holding shares by a holding
company of the subsidiary
company will be treated as a
supply of service or not and
whether the same will attract
GST or not.
Securities are considered neither goods nor services
in terms of definition of goods under clause (52) of
section 2 of CGST Act and the definition of services
under clause (102) of the said section. Further, securities
include ‘shares’ as per definition of securities under
clause (h) of section 2 of Securities Contracts
(Regulation) Act, 1956.
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This implies that the securities held by the holding
company in the subsidiary company are neither goods
nor services. Further, purchase or sale of shares or
securities, in itself is neither a supply of goods nor a
supply of services. For a transaction/activity to be
treated as supply of services, there must be a supply as
defined under section 7 of CGST Act. It cannot be said
that a service is being provided by the holding company
to the subsidiary company, solely on the basis that there
is a SAC entry ‘997171’ in the scheme of classification
of services mentioning; “the services provided by
holding companies, i.e. holding securities of (or other
equity interests in) companies and enterprises for the
purpose of owning a controlling interest.”, unless there
is a supply of services by the holding company to the
subsidiary company in accordance with section 7 of
CGST Act.
Therefore, the activity of holding of shares of
subsidiary company by the holding company per se
cannot be treated as a supply of services by a holding
company to the said subsidiary company and cannot be
taxed under GST.
3. It is requested that suitable trade notices may be issued to publicize the contents of
this Circular.
4. Difficulty, if any, in implementation of this Circular may please be brought to the
notice of the Board. Hindi version would follow.
(Sanjay Mangal)
Principal Commissioner (GST)
