{"id":3540,"date":"2021-03-22T07:21:53","date_gmt":"2021-03-22T07:21:53","guid":{"rendered":"https:\/\/swaritadvisors.com\/blog\/?p=3540"},"modified":"2021-03-22T07:21:56","modified_gmt":"2021-03-22T07:21:56","slug":"gst-applicability-on-nbfcs","status":"publish","type":"post","link":"https:\/\/swaritadvisors.com\/blog\/gst-applicability-on-nbfcs\/","title":{"rendered":"GST Applicability on NBFCs: A Complete Overview"},"content":{"rendered":"\n<p class=\"has-drop-cap\">After\nimplementing GST (Goods and Service Tax) in India, it brings a significant\nchange from the present tax regime. Unlike the past tax regime, it is\ncompletely free and transparent from complications. The introduction of GST in\nIndia has made it easy and smooth for the tax authority to get free from tax\nevasion and corruption. GST not only increase the growth of the Indian Economy\nbut also assist the Government of India to increase its revenue. In this blog,\nwe discuss about the concept of GST applicability on <strong><a href=\"https:\/\/swaritadvisors.com\/nbfc-registration\" class=\"text-primary\">NBFCs<\/a><\/strong>.\nBut before starting the concept of the GST applicability on NBFCs, we must\nunderstand the basics of GST in India.<\/p>\n\n\n\n<div id=\"ez-toc-container\" class=\"ez-toc-v2_0_65 counter-hierarchy ez-toc-counter ez-toc-light-blue ez-toc-container-direction\">\n<p class=\"ez-toc-title\">Table of Contents<\/p>\n<label for=\"ez-toc-cssicon-toggle-item-6a3a6279b3b9e\" class=\"ez-toc-cssicon-toggle-label\"><span class=\"\"><span class=\"eztoc-hide\" style=\"display:none;\">Toggle<\/span><span class=\"ez-toc-icon-toggle-span\"><svg style=\"fill: #999;color:#999\" xmlns=\"http:\/\/www.w3.org\/2000\/svg\" class=\"list-377408\" width=\"20px\" height=\"20px\" viewBox=\"0 0 24 24\" fill=\"none\"><path d=\"M6 6H4v2h2V6zm14 0H8v2h12V6zM4 11h2v2H4v-2zm16 0H8v2h12v-2zM4 16h2v2H4v-2zm16 0H8v2h12v-2z\" fill=\"currentColor\"><\/path><\/svg><svg style=\"fill: #999;color:#999\" class=\"arrow-unsorted-368013\" xmlns=\"http:\/\/www.w3.org\/2000\/svg\" width=\"10px\" height=\"10px\" viewBox=\"0 0 24 24\" version=\"1.2\" baseProfile=\"tiny\"><path d=\"M18.2 9.3l-6.2-6.3-6.2 6.3c-.2.2-.3.4-.3.7s.1.5.3.7c.2.2.4.3.7.3h11c.3 0 .5-.1.7-.3.2-.2.3-.5.3-.7s-.1-.5-.3-.7zM5.8 14.7l6.2 6.3 6.2-6.3c.2-.2.3-.5.3-.7s-.1-.5-.3-.7c-.2-.2-.4-.3-.7-.3h-11c-.3 0-.5.1-.7.3-.2.2-.3.5-.3.7s.1.5.3.7z\"\/><\/svg><\/span><\/span><\/label><input type=\"checkbox\"  id=\"ez-toc-cssicon-toggle-item-6a3a6279b3b9e\"  aria-label=\"Toggle\" \/><nav><ul class='ez-toc-list ez-toc-list-level-1 ' ><li class='ez-toc-page-1 ez-toc-heading-level-2'><a class=\"ez-toc-link ez-toc-heading-1\" href=\"https:\/\/swaritadvisors.com\/blog\/gst-applicability-on-nbfcs\/#What_is_GST_%E2%80%93_An_Overview\" title=\"What is GST? \u2013 An Overview\">What is GST? \u2013 An Overview<\/a><\/li><li class='ez-toc-page-1 ez-toc-heading-level-2'><a class=\"ez-toc-link ez-toc-heading-2\" href=\"https:\/\/swaritadvisors.com\/blog\/gst-applicability-on-nbfcs\/#GST_Applicability_on_NBFCs_in_India\" title=\"GST Applicability on NBFCs in India\">GST Applicability on NBFCs in India<\/a><\/li><li class='ez-toc-page-1 ez-toc-heading-level-2'><a class=\"ez-toc-link ez-toc-heading-3\" href=\"https:\/\/swaritadvisors.com\/blog\/gst-applicability-on-nbfcs\/#What_are_the_Benefits_of_GST_Applicability_on_NBFCs\" title=\"What are the Benefits of GST Applicability on NBFCs?\">What are the Benefits of GST Applicability on NBFCs?<\/a><\/li><li class='ez-toc-page-1 ez-toc-heading-level-2'><a class=\"ez-toc-link ez-toc-heading-4\" href=\"https:\/\/swaritadvisors.com\/blog\/gst-applicability-on-nbfcs\/#Possible_Aspects_of_GST_on_NBFCs\" title=\"Possible Aspects of GST on NBFCs\">Possible Aspects of GST on NBFCs<\/a><\/li><li class='ez-toc-page-1 ez-toc-heading-level-2'><a class=\"ez-toc-link ez-toc-heading-5\" href=\"https:\/\/swaritadvisors.com\/blog\/gst-applicability-on-nbfcs\/#Rule_3_of_Input_Tax_Credit\" title=\"Rule 3 of Input Tax Credit\">Rule 3 of Input Tax Credit<\/a><ul class='ez-toc-list-level-3' ><li class='ez-toc-heading-level-3'><a class=\"ez-toc-link ez-toc-heading-6\" href=\"https:\/\/swaritadvisors.com\/blog\/gst-applicability-on-nbfcs\/#Reference_of_Section_17_2_of_CGST_Act_2017_for_understanding_GST_Applicability_on_NBFCs\" title=\"Reference of Section 17 (2) of CGST Act 2017, for understanding GST\nApplicability on NBFCs\">Reference of Section 17 (2) of CGST Act 2017, for understanding GST\nApplicability on NBFCs<\/a><\/li><li class='ez-toc-page-1 ez-toc-heading-level-3'><a class=\"ez-toc-link ez-toc-heading-7\" href=\"https:\/\/swaritadvisors.com\/blog\/gst-applicability-on-nbfcs\/#Reference_of_Section_17_4_of_CGST_Act_2017_for_understanding_GST_on_NBFCs\" title=\"Reference of Section 17 (4) of CGST Act 2017, for understanding GST on\nNBFCs\">Reference of Section 17 (4) of CGST Act 2017, for understanding GST on\nNBFCs<\/a><\/li><\/ul><\/li><li class='ez-toc-page-1 ez-toc-heading-level-2'><a class=\"ez-toc-link ez-toc-heading-8\" href=\"https:\/\/swaritadvisors.com\/blog\/gst-applicability-on-nbfcs\/#Conclusion\" title=\"Conclusion\">Conclusion<\/a><\/li><\/ul><\/nav><\/div>\n<h2 class=\"wp-block-heading\"><span class=\"ez-toc-section\" id=\"What_is_GST_%E2%80%93_An_Overview\"><\/span>What is GST? \u2013 An Overview<span class=\"ez-toc-section-end\"><\/span><\/h2>\n\n\n\n<p>The\nfull form of GST is Goods and Services Tax; it is the indirect tax that has\nremoved other indirect taxes in India. It is a complete and purpose-based tax\nin India that was passed by the Indian Parliament in March 2017, but it came\ninto reality in July 2017. Goods and Services Tax is charged on every value\naddition; it will be executed on every sale stage.<\/p>\n\n\n\n<h2 class=\"wp-block-heading\"><span class=\"ez-toc-section\" id=\"GST_Applicability_on_NBFCs_in_India\"><\/span>GST Applicability on NBFCs in India<span class=\"ez-toc-section-end\"><\/span><\/h2>\n\n\n\n<p>Following\nis the list of GST applicability on NBFCs (Non-Banking Financial Companies) in\nIndia:<\/p>\n\n\n\n<ul><li>18% on Processing Fees;<\/li><li>18% on Syndication or Controller Fee;<\/li><li>18% on Commission Income and;<\/li><li>18% on Swap Charge and Foreclosure.<\/li><\/ul>\n\n\n\n<p><strong><em>Following\nare some of the prominent provisions of GST on NBFCs:<\/em><\/strong><\/p>\n\n\n\n<ul><li>Before the implementation of GST in India, the\nservices tax was 15%, but after GST, the services provided are taxable at 18%;<\/li><li>Before GST, Central Registration was required,\nbut after GST, one is required to attain State-wise <strong><a href=\"https:\/\/swaritadvisors.com\/gst-registration\" class=\"text-primary\">GST Registration<\/a><\/strong>;<\/li><li><strong><em>Integrated Goods and Services Tax <\/em><\/strong>(IGST)\nwill be appropriate to inter-state supplies of services same that occur between\nthe branches of the same company;<\/li><li>37 Returns for each state in India, whereas 61\nreturns in the case of <strong><em>TDS (Tax Deducted at Source) and ISD (Input\nService Distributor) <\/em><\/strong>provision are applicable.<\/li><\/ul>\n\n\n\n<h2 class=\"wp-block-heading\"><span class=\"ez-toc-section\" id=\"What_are_the_Benefits_of_GST_Applicability_on_NBFCs\"><\/span>What are the Benefits of GST Applicability on NBFCs?<span class=\"ez-toc-section-end\"><\/span><\/h2>\n\n\n\n<p>Following\nis the list of all the benefits of GST Applicability on NBFCs (Non-Banking\nFinancial Companies):<\/p>\n\n\n\n<ul><li>The Goods and Services Tax (GST) has combined all the different indirect taxes, such as sales tax, purchase tax, state cess, excise duty, etc.<\/li><li>Since Goods and Services Tax is based on digital compliance and returns filing, therefore, the Non-Banking Financial Companies can make sure that their <strong><a href=\"https:\/\/swaritadvisors.com\/gst-return-filing\" class=\"text-primary\">GST Return Filing<\/a><\/strong> and other compliances are addressed without any problem.<\/li><li>The primary idea behind Goods and Services Tax (GST) requires only such businesses that have ayearly turnover of Rs. 12 lakhs for GST Registration in India. So, it permits advancing businesses functioning at a small-scale to get freedom from obtaining tax registration and additional, cut their functioning costs to a significant amount.<\/li><\/ul>\n\n\n\n<h2 class=\"wp-block-heading\"><span class=\"ez-toc-section\" id=\"Possible_Aspects_of_GST_on_NBFCs\"><\/span>Possible Aspects of GST on NBFCs<span class=\"ez-toc-section-end\"><\/span><\/h2>\n\n\n\n<p>Following\nare some vital aspects of GST applicability on NBFCs in India:<\/p>\n\n\n\n<ul><li><strong><em>Place of Supply<\/em><\/strong><em>:<\/em> The place of supply for financial and banking services such as <a href=\"https:\/\/en.wikipedia.org\/wiki\/Stockbroker\">stockbroking<\/a> services to any person or individual should be at the place of the recipient of facilities on the dealer of services record. As per <strong><em>Section12 (12) IGST Act, 2017, <\/em><\/strong>in case the location of the beneficiary of services is not on the supplier records, then the supply location shall be the place for the supplier of amenities.<\/li><li><strong><em>Input Credit Tax<\/em><\/strong><em>:<\/em> <strong><em>Section 17 CGST Act<\/em><\/strong> offers two different options for Input Credit Tax, and you can check the same below:<\/li><\/ul>\n\n\n\n<ol><li>Every month gain an amount equivalent to 80% of\neligible Input Tax Credit in capital goods and input services in that\nparticular month. The rest will be lapsed as per <strong><em>Rule 3 of ITC<\/em><\/strong>.<\/li><li>According to <strong><em>Section 17 (2) of the CGST Act or\nCentral Goods and Services Tax<\/em><\/strong>and <strong><em>Rule 7 of ITC<\/em><\/strong>, take input tax as is\nattributable to the taxable supply and not for relieving supply.<\/li><\/ol>\n\n\n\n<h2 class=\"wp-block-heading\"><span class=\"ez-toc-section\" id=\"Rule_3_of_Input_Tax_Credit\"><\/span>Rule 3 of Input Tax Credit<span class=\"ez-toc-section-end\"><\/span><\/h2>\n\n\n\n<p>Non-Banking\nFinancial Companies in India are operating a business in the supply of services\nby receiving deposit or expending credit cannot attain the credit of paid tax\nregarding input services that are utilized for the purpose of non-business.\nAdditionally, these companies cannot gain credit attributable to supplies as\nper <strong><em>Sub-Section\n(5) of Section 17. <\/em><\/strong>Apart from this, in the purview of <strong><em>Sub-Section\n(4) of Section 17, <\/em><\/strong>Non-Banking Financial Companies will benefit credit\nof tax paid regarding services &amp; inputs. The rest of the amount, 50%, will\nbe the <strong><em>ITC (Input Tax Credit)<\/em><\/strong>permissible for the company. To avail of\nthis credit, taxpayers require to take benefit of the <strong><em>GSTR-2 Form<\/em><\/strong>.<\/p>\n\n\n\n<h3 class=\"wp-block-heading\"><span class=\"ez-toc-section\" id=\"Reference_of_Section_17_2_of_CGST_Act_2017_for_understanding_GST_Applicability_on_NBFCs\"><\/span>Reference of Section 17 (2) of CGST Act 2017, for understanding GST\nApplicability on NBFCs<span class=\"ez-toc-section-end\"><\/span><\/h3>\n\n\n\n<p>In the\ncase of goods or services or both of them are used by a registered individual\nmoderately in order to effect taxable supplies comprisingzero-rated supplies\nunder <strong><em>Central Goods and Services Tax Act <\/em><\/strong>and under the Integrated\nGoods and Services Tax Act and relatively for causing exempt supplies under\nboth Acts, the credit amounts are restricted to so much of the input tax as is\nattributable to the suggested supplies comprising the zero-rated supplies.<\/p>\n\n\n\n<h3 class=\"wp-block-heading\"><span class=\"ez-toc-section\" id=\"Reference_of_Section_17_4_of_CGST_Act_2017_for_understanding_GST_on_NBFCs\"><\/span>Reference of Section 17 (4) of CGST Act 2017, for understanding GST on\nNBFCs<span class=\"ez-toc-section-end\"><\/span><\/h3>\n\n\n\n<p>A\nfinancial company like Non-Banking Financial Company (NBFC) will have a choice\nto obeys the provisions of sub-section (2) or obtain 50% of ITC (Input Tax\nCredit) available for input services, inputs, and capital good in the month.\nThe remaining shall be lapsed provided:<\/p>\n\n\n\n<ul><li>Once the option applied will not be withdrawn at\nthe time of remaining financial year;<\/li><li>The limitation of 50% will not apply to the tax,\nwhich has to be paid on the supplies made by a single registered individual to\nother registered individuals having the same PAN or Permanent Account Number.<\/li><\/ul>\n\n\n\n<h2 class=\"wp-block-heading\"><span class=\"ez-toc-section\" id=\"Conclusion\"><\/span>Conclusion<span class=\"ez-toc-section-end\"><\/span><\/h2>\n\n\n\n<p>The provisions relating to the GST applicability on NBFCs has been explained above, but the government needs to introduce more reforms to reduce the burden on NBFCs. These companies were expecting the government to take some creative measures in this direction to ease the burden of the tax.<\/p>\n\n\n\n<p><strong>Also, Read: <\/strong><mark style=\"background: #fffd03 !important;\"><a href=\"https:\/\/swaritadvisors.com\/blog\/prerequisites-of-nbfc-registration\/\">Prerequisites of NBFC Registration in India \u2013 An Overview<\/a><\/mark><\/p>\n","protected":false},"excerpt":{"rendered":"<p>After implementing GST (Goods and Service Tax) in India, it brings a significant change from the present tax regime. Unlike the past tax regime, it is completely free and transparent from complications. The introduction of GST in India has made it easy and smooth for the tax authority to get free from tax evasion and [&hellip;]<\/p>\n","protected":false},"author":6,"featured_media":3541,"comment_status":"open","ping_status":"open","sticky":false,"template":"","format":"standard","meta":[],"categories":[39,58],"tags":[525],"acf":[],"_links":{"self":[{"href":"https:\/\/swaritadvisors.com\/blog\/wp-json\/wp\/v2\/posts\/3540"}],"collection":[{"href":"https:\/\/swaritadvisors.com\/blog\/wp-json\/wp\/v2\/posts"}],"about":[{"href":"https:\/\/swaritadvisors.com\/blog\/wp-json\/wp\/v2\/types\/post"}],"author":[{"embeddable":true,"href":"https:\/\/swaritadvisors.com\/blog\/wp-json\/wp\/v2\/users\/6"}],"replies":[{"embeddable":true,"href":"https:\/\/swaritadvisors.com\/blog\/wp-json\/wp\/v2\/comments?post=3540"}],"version-history":[{"count":3,"href":"https:\/\/swaritadvisors.com\/blog\/wp-json\/wp\/v2\/posts\/3540\/revisions"}],"predecessor-version":[{"id":3544,"href":"https:\/\/swaritadvisors.com\/blog\/wp-json\/wp\/v2\/posts\/3540\/revisions\/3544"}],"wp:featuredmedia":[{"embeddable":true,"href":"https:\/\/swaritadvisors.com\/blog\/wp-json\/wp\/v2\/media\/3541"}],"wp:attachment":[{"href":"https:\/\/swaritadvisors.com\/blog\/wp-json\/wp\/v2\/media?parent=3540"}],"wp:term":[{"taxonomy":"category","embeddable":true,"href":"https:\/\/swaritadvisors.com\/blog\/wp-json\/wp\/v2\/categories?post=3540"},{"taxonomy":"post_tag","embeddable":true,"href":"https:\/\/swaritadvisors.com\/blog\/wp-json\/wp\/v2\/tags?post=3540"}],"curies":[{"name":"wp","href":"https:\/\/api.w.org\/{rel}","templated":true}]}}