Clearing Government’s stance on key aspects relating to BFSI sector, the revenue department has clarified that banking services like cheque book issuance and ATM withdrawals would be kept outside the ambit of Goods and Services Tax (GST). However, late payment charges on outstanding credit card bills and purchase of insurance policies by NRIs will attract the Government levy.
In a set of FAQ (frequently asked question) on applicability of GST on banking, insurance and stock brokers, the revenue department, through its latest communiqué, has made it clear that transactions relating to securitisation, derivatives, future and forward contracts are exempt from GST.
Worth noting is last month, the Department of Financial Services had approached the revenue department seeking exemption of these transactions from GST after the banks received service tax notice for free services offered to their clients. In this backdrop, the Government’s latest communiqué is a significant development aimed at putting rest to confusion over key aspects relating to the BFSI sector.
Clarifying whether, services supplied without consideration to a recipient other than ‘related party’ / ‘distinct person’ taxable, The FAQ stated that Section 7 of the CGST Act, 2017 provides that services supplied without consideration to related persons or distinct persons only would qualify as ‘supply’.
“Therefore, 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,” the Government statement said.
On whether GST will be levied on the exit-load of mutual funds, the Revenue department further clarified that exit load in the form of a fee (whether or not as a fixed percentage of the investment) is liable to GST.