The Central Board of Indirect Taxes and Customs (CBIC) has recently clarified that the GST Exemption can be granted to the services by the Business Facilitator (BF) or a Business Correspondent (BC) to Banking Company with respect to the accounts in the rural areas subject to certain conditions.
Regarding the value of services by BF/BC to a banking company, the Board clarified that the banking company is the service provider in the business facilitator model or the business correspondent model operated by a banking company as per RBI guidelines. The banking company is liable to pay GST on the entire value of service charge or fee charged to customers whether or not received via business facilitator or the business correspondent.
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With regard to the scope of services by BF/BC to a banking company with respect to accounts in rural areas, it was clarified that “for the purpose of availing exemption from GST under Sl. No. 39 of said notification, the conditions flowing from the language of the notification should be satisfied. These conditions are that the services provided by a BF/BC to a banking company in their respective individual capacities should fall under the Heading 9971 and that such services should be with respect to accounts in a branch located in the rural area of the banking company. The procedure for classification of the branch of a bank as located in the rural area and the services which can be provided by BF/BC is governed by the RBI guidelines. Therefore, classification adopted by the bank in terms of RBI guidelines in this regard should be accepted,” the Board said.To Read the full text of the Circular CLICK HERE