GST 2016 Taxation

CBIC releases FAQs document on the financial services sector-Banking, Insurance, Broker

The Central Board of Indirect Taxes and Customs (CBIC) has released a frequently asked questions document, which gives clarification on various issues faced by the financial services sector. FAQs document covers the issues of the banking, insurance, stock broking and mutual funds sectors.
Hopefully financial sector will find it useful for GST compliance

Highlights of major clarification as are as follows:

Banking Sector

  1. ATM on its own does not constitute a place of business, as defined in the CGST Act, 2017.

  2. Third party places are neither places of business nor fixed establishments from where Banks ordinarily carry on their business.

  3. Where the services are rendered upto 30th June, 2017 and invoices in respect thereof are also raised on or before 30th June, 2017, the point of taxation would be as per the earlier service tax law and the services will be subject to service tax.

  4. Where the transaction is reported by the banks as B2C owing to non-availability of the GSTIN of the customer, the said transaction cannot be amended to add the GSTIN of the customer and reported as B2B transaction.

  5. Entities may issue a consolidated statement/ invoice/ advice to the customer at the end of the month, with the details of all the charges levied during such month and GST payable thereon.

  6. The Bank / insurance company can rely upon the GSTIN provided by the customer for Place of supply determination.

  7. Yes. Services provided by banks to RBI would be taxable as these are not covered by any of the exemptions or excluded from the purview of GST under the CGST Act, 2017 or under the IGST Act, 2017.

  8. For the purposes of credit distribution by an input service distributor (ISD) for months of August and September 2017, the turnover of July 2017 may be considered.

  9. Since future contracts are in the nature of derivatives these qualify as ‘securities’ as defined in Section 2(101) of the CGST Act, 2017. As securities are neither ‘goods’ nor ‘services’ as defined in the CGST Act, 2017, future contracts are not chargeable to GST. But where the future contracts have a delivery option and the settlement of contract takes place by way of actual delivery of underlying commodity/currency, then such forward contracts would be treated as normal supply of goods and liable to GST.

  10. Sale, purchase, acquisition or assignment of a secured debt does not constitute a transaction in money; it is in the nature of a derivative and hence a security.

  11. Sale of repossessed asset falls within the scope of supply and will be chargeable to GST

  12. GST will be chargeable on any transaction processing fees levied for such takeover of loans, but not on the interest component (as interest is exempted).

INSURANCE SECTOR

  1. Credit of Krisi Kalyan Cess (KKC) ? It is not permitted in terms of section 140(1) of the CGST Act, 2017 read with Rule 117(1) of the CGST Rules, 2017.

  2. Yes, ITC will be allowed on services of motor garage used by an insurance company for claim settlement.

  3. The service of re-insurance falls within the scope of supply, and is chargeable to GST.

STOCK BROKING SERVICES

  1. GST on Brokerage. Yes. Since the stock brokers are engaged in the business of supplying the stock broking service, appropriate GST is payable on the same.

  2. Any interest/ delayed payment charges charged for delay in payment of brokerage amount/settlement obligations/margin trading facility shall be leviable to GST.

  3. Since stock brokers arrange the supply of securities between two or more persons, stock brokers would be covered by the definition of “intermediary”

  4. The stock broker being an intermediary, this situation shall be covered under the provisions of section 13(8)(b) of the IGST Act, 2017 which provides that the place of supply shall be the location of the supplier of services.

  5. 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.

Click here to: Refer Original FAQ Doc for detailed information

Note: Reference to CGST Act, 2017 includes reference to SGST Act, 2017 and UTGST Act, 2017 also. Further reference to CGST Rules, 2017 includes reference to SGST Rules, 2017 / UTGST Rules, 2017 also.

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