Follow Us:

As per the Guidelines issued by the RBI, Banks may pay a reasonable commission/Fees to the Business correspondent( BC) or Business Facilitator (BF) the rate and the quantum of the same shall be periodically reviewed.The agreement of the banks with BC/BF prohibits them specifically from charging anything from the customer. However the bank may collect the reasonable service charge from the customer for the services rendered in a transparent manner. The arrangement of the banks with BC’s / BF’s specifies the requirement that the transactions are accounted in the banks book by the end of the day or next working day. Further for all the arrangements and agreements with customer bank takes the responsibilities for act of omission and commission of the BF/BC. Therefore, the banking company is the service provider in the BC Model operated as per RBI Guidelines. The banking company is liable to pay GST on the entire value of service charged received from the customer irrespective of the same is availed by BC/BF.

These may have impact on the cost of the banks in case they are availing the benefit of section 17(4) of CGST Act, 2017 accordingly the Input Tax credit upto 50% flat  will be disallowed.

Service in relation to accounts of rural branch

Further BF/BC providing services in relation “accounts in its rural area branch “is exempt vide Notification No. 12/2017- CT (R) dated 28.06.2017. The condition for the said exemption needs to be fulfilled are services shall be provided by BF/BC to the bank shall be the services falling under the heading 9971 and that to with respect to the accounts of the rural branch. The procedure for classification of Branch as rural branch shall be done as per the RBI guidelines.


Author Bio

I am a part of the one Mumbai Based CA firm serving from last 50 years to the society . I am engaged especially in the field of Indirect taxation from last 4 years. View Full Profile

My Published Posts

Changes in GST vide Budget 2023 How does one confirm GST applicability on any goods/services? Casual Taxable Person – Tax implication Under GST TCS Mechanism under GST Non resident Taxable Person | Section 2(77) | CGST Act 2017 View More Published Posts

Join Taxguru’s Network for Latest updates on Income Tax, GST, Company Law, Corporate Laws and other related subjects.

One Comment

  1. Vishal Kumar says:

    It is important to create a inclusive systematic framework involving all stakeholders from business correspondents to corporate bank correspondents and banks for a successful comprehensive financial inclusion.

Leave a Comment

Your email address will not be published. Required fields are marked *

Search Post by Date
July 2024