Facts: – ‘A’ Ltd. given a loan to ‘B’ Ltd. ‘B’ Ltd. paying interest to ‘A’ Ltd on a loan taken from ‘A’ Ltd.

Issue under consideration:-

• Whether GST is leviable on Interest Income earned by ‘A’ Ltd.

• If yes then what is the rate of GST

Legal Provisions:-

• Under GST, Supply is considered a taxable event for charging tax. The liability to pay tax arises at the ‘time of supply of goods or services’. Thus, determining whether or not a transaction falls under the meaning of supply, is important to decide GST’s applicability.

GST goods and Services TaxSupply includes sale, transfer, exchange, barter, license, rental, lease and disposal. If a person undertakes either of these transactions during the course or furtherance of business for consideration, it will be covered under the meaning of Supply under GST.

• Supply has two important elements:

a) Supply is done for a consideration

b) Supply is done in course of furtherance of business

Notification No. 12/2017- Central Tax (Rate) dt. 28.06.2017 and Notification No. 9/2017-Integrated Tax (Rate) dt. 28.06.2017 as amended, provides a list of services exempted from payment of Central Tax on intra-State supply and Integrated Tax on Inter-State supply. Entry 27(a) of the Notification No. 12/2017 and Entry 28(a) of the Notification No. 9/2017 relates to services by way of extending deposits, loans or advances in so far as the consideration is represented by way of interest.

Conclusion:-

The services under consideration is covered under the above Notification. Therefore, such services are exempted from payment of GST and the lending company is not required to discharge GST on the activity of providing services by way of extending deposits, loans or advances where the consideration is represented by way of interest.

Therefore in given case GST is not leviable on Interest Income earned by ‘A’ Ltd.

Hope the above Article serve your purpose.

Always at Your Service !!

You can post your queries on Income Tax and GST to rohanrp1983@gmail.com

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Qualification: Student - CA/CS/CMA
Company: CA Rajendra Y. Padhye
Location: Mumbai, Maharashtra, IN
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9 Comments

  1. Anil nimja says:

    आवश्यकतायदि किसी व्यक्ति या एचयूएफ की प्रति वर्ष 25 लाख से अधिक की ब्याज आय है, तो क्या उसे जीएसटी पंजीकरण प्राप्त करने की आवश्यकता है? कृपया ध्यान दें कि उसके पास ब्याज आय के अलावा कोई अन्य आय

  2. TAXSHILA says:

    High sea sales are to be shown as non-gst supply in 3b or not?

    Also suggest that, i have made import on behalf of my customers and as per Bill of entry all the duties and Igst paid by them, now i have to pay RCM on ocean transportation?

  3. Manoj Anand says:

    If an individual or HUF has an interest income of more than 25 lakhs per year, does he/she need to obtain GST registration? Kindly note that he/she does not have any other income other than interest income.

  4. CHUNILAL PATEL says:

    I GIVEN LOAN TO INDIVIDUAL PERSON FROM MY PARTNERSHIP FIRM AND INDIVIDUAL PERSON PAY INTEREST TO FIRM WHICH IS CHARGEABLE UNDER GST OR NOT

  5. Khirod Swain says:

    Sir I am a registered person providing loan to my customers. I also collect interest from loan .So tell me whether I will pay GST on interest earned by me or not?

  6. Nimish Shah says:

    So if Loan from A Ltd given to B Ltd use for business payment of A Ltd and then A Ltd pay interest to B Ltd for loan given will attract GST

    1. Rohan1983 says:

      Dear Rajesh Kumar

      If post sale discount is known at the time of supply then one can reduce it from the taxable value provided the conditions mentioned with respect the same fulfilled. However, if it is not known at the time of supply then one can not reduce it from the taxable value and required to pay GST on full value.

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