Budget 2026 brings GST relief to stockbrokers, softens impact of STT hike

Market Performance: Budget Day Volatility Takes Center Stage

Budget 2026 turned into a volatile session for Dalal Street.

Indian equity markets reacted sharply after the government announced a higher Securities Transaction Tax (STT) on futures and options. Both benchmark indices slipped over 2%, marking the weakest Budget Day performance in six years.

While the STT hike grabbed immediate attention, another key announcement quietly reshaped the outlook for Indian stockbrokers—especially those servicing overseas clients.

That relief came through a significant GST-related change.

Main News: Budget 2026 Tweaks GST Rules for Stockbroking Services

To ease pressure on intermediaries hit by the STT increase, Budget 2026 proposed a critical amendment in GST law.

The Finance Bill, 2026 proposes to delete Clause (b) of sub-section (8) under Section 13 of the IGST Act. Earlier, this rule considered the location of the service provider as the place of supply for intermediary services such as stockbroking, regardless of the fact that the client was located outside India.

That single provision had a big impact.

Under the earlier rule:

• Indian stockbrokers serving overseas clients
• Including foreign portfolio investors (FPIs)
• Were liable to 18% GST, even on cross-border services

This was because the place of supply was considered to be inside India, regardless of where the client was based.

What Changes After Budget 2026?

With the proposed omission of Section 13(8)(b), the rulebook changes.

Now:

• The place of supply will be determined under Section 13(2)
• This means the client’s location becomes the deciding factor

For Indian stockbrokers servicing foreign clients:

• The place of supply shifts outside India
• Such services can now qualify as exports of services
• Exported services are zero-rated under GST

This shift directly reduces the GST burden on broking services provided to overseas investors.

Key Conditions Attached to the GST Relief

The zero-rating benefit is not automatic. Budget 2026 keeps one important condition in place.

To qualify:

• Payments must be received in
  • Convertible foreign currency, or
  • Permitted Indian rupees, treated as deemed exports

If this condition is met, Indian broking firms can avoid the 18% GST on cross-border intermediary services.

For the industry, this is a structural change—not a temporary relief.

STT Hike: What Budget 2026 Announced?

Alongside the GST amendment, Budget 2026 also increased STT in the derivatives segment.

Here’s what changed:

• STT on futures contracts
  • Increased to 0.05%
  • From 0.02%
• STT on options premium
  • Raised to 0.15%
  • From 0.10%
• STT on exercise of options
  • Increased to 0.15%
  • From 0.125%

The government stated that the intent behind the STT hike is to curb excessive speculative activity, especially among small participants in the F&O market.

Why GST Relief Matters More Than It Seems?

At first glance, the STT hike dominated headlines. But the GST change carries deeper implications.

Earlier:

• Indian intermediaries were taxed despite earning foreign income
• Cross-border broking services lost cost competitiveness

After Budget 2026:

• Indian brokers servicing FPIs face lower indirect tax friction
• Export classification improves global positioning
• GST ambiguity around intermediary services is reduced

For firms with a strong international client base, this amendment materially changes the cost structure.

Company & Industry Impact: Broking Firms in Focus

The Budget 2026 GST tweak directly impacts:

• Stockbroking companies
• Capital market intermediaries
• Firms providing services to FPIs and overseas investors

While the STT hike adds pressure on derivatives trading volumes, the GST relief offers a counterbalance—especially for firms with cross-border exposure.

No new incentives were introduced.

No forward guidance was given.

Only a clear rule change that simplifies taxation.

Summary: Budget 2026 Sends a Mixed but Measured Signal

Budget 2026 delivered two contrasting moves for the capital markets.

• A higher STT increased near-term cost pressure in derivatives trading
• A GST amendment provided long-term relief to Indian stockbrokers serving overseas clients

By aligning the place of supply with the client’s location, the government addressed a long-standing GST issue for intermediary services.

The immediate market reaction reflected the STT shock.

The structural GST relief, however, may quietly reshape the economics of India’s broking industry in the years ahead.

In Budget 2026, the message was clear—tighten speculative activity, but smoothen genuine cross-border business flows.

Source: Livemint