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No taxability of shares held in a subsidiary company by the holding company





The Central Board of Indirect Taxes and Customs (GST Policy Wing) issued Circular No. 196/08/2023-GST dated July 17, 2023 regarding Clarification on taxability of shares held in a subsidiary company by the holding company.

 Highlights

  • Securities are considered neither goods nor services in terms of definitions given under section 2.
  • 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 the subsidiary company by the holding company per se  cannot be treated as a supply of services.


Circulars:

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           (The views expressed in this article are strictly personal.)

            By  GST Info Tamil

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