Clarification Expected on GST for NBFC Co-Lending Arrangements

By: Admin
May 21, 2024
Categories: GST Recent News
4 Min Read

The government has assured non-banking financial companies (NBFCs) that it will review the concerns regarding the imposition of goods and services tax (GST) on their co-lending arrangements with banks. Officials stated that a clarification might be issued following an investigation into the matter. During a recent meeting with finance ministry officials, banks and NBFCs expressed their worries about GST authorities issuing notices, which they fear could distort the market and increase lending costs.

The issue at hand is whether GST should apply to co-lending models, with tax authorities arguing that it constitutes a service between co-lenders, thus attracting an 18% tax. However, the industry argues that co-lending is not a service and should not be taxed. The meeting, led by Department of Financial Services Secretary Vivek Joshi, included representatives from banks, NBFCs, the Finance Industry Development Council (FIDC), and the Microfinance Institutions Network (MFIN).

Previously, the FIDC sought clarity from the government on this issue. A senior executive who attended the meeting, speaking anonymously, mentioned that banks and NBFCs raised their concerns about GST on co-lending arrangements due to communications received from the Directorate General of GST Intelligence. Officials assured attendees that the matter would be investigated.