GST relief for FPIs may benefit brokers and depositories, says Jefferies
Jefferies initiates coverage on NSE with a Buy rating and Rs 2,085 target, citing growth potential from new businesses and technology services.
A government clarification exempting eligible brokerage services for overseas investors from goods and services tax (GST) could lower the cost of investing in Indian equities, potentially benefiting stockbrokers and depositories if it leads to higher cash-market turnover, according to Jefferies. The brokerage expected the earnings impact on stock exchanges to be comparatively lower.
In a circular dated October 26, 2026, the Ministry of Finance clarified that brokerage paid by overseas clients, including foreign portfolio investors (FPIs), non-resident Indians (NRIs) and overseas citizens of India (OCIs), from repatriable Indian rupee accounts qualifies as an export of services and therefore does not attract GST.
Jefferies said the clarification could reduce investing costs amid discussions about tax cuts for investors. The brokerage identified a potential benefit for brokers and depositories if the lower tax burden led to an increase in cash-market turnover, while expecting a lower earnings impact for exchanges.
Jefferies said higher cash-market turnover resulting from the tax relief could benefit stockbrokers and depositories, while stock exchanges could see a comparatively lower earnings impact.
The brokerage stated in its report, “Tax break led cash turnover rise could be a positive for brokers/depositories, with lower earnings impact for exchanges.”
The potential benefit depends on whether the GST clarification leads to higher cash-market turnover.
GST clarification covers eligible overseas brokerage payments
The Ministry of Finance circular clarified the GST treatment of brokerage paid by overseas clients from repatriable Indian rupee accounts. Under the clarification described by Jefferies, these payments qualify as exports of services and do not attract GST.
The relief applies to eligible brokerage payments by FPIs, NRIs and OCIs, subject to the conditions set out in the circular. It should not be read as a blanket exemption covering every brokerage transaction.
Jefferies noted that the clarification came amid discussions about tax cuts for investors, including a report published by The Indian Express on October 13, 2026.
Jefferies’ data showed substantial net FPI selling in Indian equities. Net equity outflows stood at $18.8 billion in calendar year 2025 (CY25) and $32.3 billion in calendar year 2026 to date (CY26TD).
The report’s chart also showed net FPI equity inflows of $21.4 billion in CY24. The combined outflows recorded in CY25 and CY26TD exceeded $50 billion.
Jefferies did not suggest that the GST clarification would reverse the outflows. Its assessment focused on the potential effect of lower brokerage-related costs on cash-market turnover and the resulting implications for market intermediaries.
Jefferies’ assessment was conditional on the tax relief leading to higher cash-market turnover. If that occurs, brokers and depositories could benefit, while the earnings impact on exchanges could be comparatively lower.
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