No GST on free services provided by Banks: FAQ document
New Delhi, June 4 (KNN) Banks providing free services to customers like ATM withdrawals will not be liable to Goods and Service Tax, the government said in Frequently Asked Question Document.
Further, it clarified that the late payment charges on outstanding credit card bills and purchase of insurance policies by NRIs will attract the levy.
In a set of FAQs on applicability of Goods and Services Tax (GST) on banking, insurance and stock brokers sectors, the revenue department has clarified that transactions relating to securitization, derivatives, future and forward contracts are exempt.
This clarification comes after the banks received service tax notice for free services offered to clients. Over this matter, last month the department of Financial Services had approached the revenue department seeking exemption of these transactions from GST.
Clarifying whether, services supplied without consideration to a recipient other than 'related party' / 'distinct person' taxable, the FAQ said, “ 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, it said.
On the levy of GST on insurance policies purchased by non-resident Indians (NRIs), it said the amounts from Non-Resident External Accounts are paid in Indian Rupees and are not received in convertible foreign exchange.
"Therefore, the conditions for export of services as provided under section 2(6) of IGST Act, 2017 are not satisfied. Life Insurance services in such cases would be treated as inter-State supplies and subject to GST," it said.
Clarifying the GST levy on exit load of mutual funds, the department said that the exit load in the form of a fee (whether or not as a fixed percentage of the investment) is liable to GST.
"Even if the exit load is in the form of units in the fund, it may be concluded that the consideration received in money was later converted to NAV units," the FAQ document said.
Besides, late payment of dues on credit card outstanding as well as interest on a finance lease transaction is taxable under GST.
It also explained the finance lease as a method of borrowing against the asset. The interest represents the time value of the money expended by the bank in financing the asset.