The Central Board of Indirect Taxes and Customs ( CBIC ) has released a set of Frequently Asked Questions (FAQs) on Banking, Insurance, and Stock Brokers wherein the Board clarified the applicability of GST in these sectors.
The FAQs clarified that the charges for late payment of dues on credit card outstanding are chargeable to GST. The exemption from levy of GST on interest specifically excludes interest charged on outstanding credit card balances as per serial no. 27 of the table of notification No. 12/2017-Central Tax (Rate) dated 28th June 2017, as amended, it said.
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It further said that the interest on a finance lease transaction is also taxable under GST.
“A finance lease is a method of borrowing against the asset. The interest represents the time value of the money expended by the Bank in financing the asset. Services by way of extending deposits, loans or advances in so far as the consideration are represented by way of interest or discount (other than interest involved in credit card services) is exempt. But, in a financial lease, the ownership of the asset is with the bank. In essence, it is a ‘purchase the asset and lend it further’ transaction for the bank. Therefore, neither the services are purely in the nature of extending loans nor the consideration for a financial lease is purely in the nature of interest. Thus, interest on finance lease transactions will be taxable under GST,” it said.
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