GST clarification on foreign investor brokerage offers sentiment boost, analysts say
Oct 28, 2026
Synopsis
The Indian government has clarified that brokerage paid by overseas clients may qualify as an export service. This could help foreign investors avoid the 18% goods and services tax on brokerage fees. Analysts suggest this clarification is sentimentally positive amid significant foreign outflows from Indian stocks. There is ongoing speculation regarding potential cuts in capital gains tax ahead of the federal budget.
The Indian government's clarification that brokerage paid by overseas clients can qualify as exports and avoid goods and services tax (GST), subject to certain conditions, is sentimentally positive for foreign investors, analysts said, at a time when record outflows have battered domestic stocks.
The Central Board of Indirect Taxes and Customs in a circular dated October 26 said that brokerage paid through repatriable rupee accounts, from which funds can be moved out of India, could count as an export of services and therefore be exempt from GST.
India levies 18% GST on brokerage fees. Full-service brokers typically charge brokerage between 0.01% and 0.55% on the value of shares traded.
The clarification could reduce the GST burden on foreign portfolio investors, and any increase in trading volumes would be positive for brokerage firms and depositories, Jefferies said in a note on Tuesday.
Foreign investors have offloaded Indian shares worth $32.66 billion so far this year, well above the previous annual record of $18.91 billion in 2025, according to National Securities Depository data.
India's benchmark Nifty 50 index is down 13.6% in 2026, setting the stage for its worst annual performance in over a decade, while MSCI's emerging markets index has risen 12.4%.
The GST clarification is "sentimentally positive but may not make much of a difference, especially for FPI mood.... However, a decision on capital gains (tax) could provide much needed relief," said Ambareesh Baliga, an independent market analyst in Mumbai.
The move comes amid speculation about a potential cut in the capital gains tax. The Indian Express newspaper earlier this week reported that the government is discussing lowering long-term capital gains tax from 12.5% for both domestic and foreign investors in the run-up to the federal budget next year.
[The Economic Times]
