The Central Board of Indirect Taxes and Customs (CBIC) has issued a set of Frequently Asked Questions on application of GST on the Banking, Insurance and Stock Brokers Sector.
Earlier, there was some confusions on the applicability of GST on banking services as the Government started issuing notices to some banks saying that tax is leviable on the free services provided by them to the customers.
It was clarified that where the services are supplied by a supplier without consideration to an unrelated recipient or a person other than a related or distinct person, the same would not amount to supply and not liable to GST. Also, any interest/ delayed payment charges charged for delay in payment of brokerage amount/settlement obligations/margin trading facility shall be leviable to GST. It further clarified that the exemption from levy of GST on interest specifically excludes interest charged on outstanding credit card balances.
According to the FAQs, third party places such as third party ATMs, Business Correspondents (BC), Customer Service Points (CSP) or third party warehouses used as per RBI guidelines are neither places of business nor fixed establishments from where Banks ordinarily carry on their business. These are independent service providers to the Bank which are subject to GST. Thus, these places are not required to be declared as place of business by the Bank.
With regard to the taxability of future contracts, it said that “As securities are neither ‘goods’ nor ‘services’ as defined in the CGST Act, 2017, future contracts are not chargeable to GST. But where the future contracts have a delivery option and the settlement of contract takes place by way of actual delivery of underlying commodity/currency, then such forward contracts would be treated as normal supply of goods and liable to GST.”
“Further, if some service charges or service fees or documentation fees or broking charges or such like fees or charges are charged, the same would be a consideration for supply of service and chargeable to GST,” it added.
It further clarified that the services of loans, advances or deposits are exempt in so far as the consideration is represented by way of interest or discount. Any charges or amounts collected over and above the interest or discount would represent taxable consideration and hence liable to GST.
