GST On Non-Banking Finance Companies (NBFCs) in India

What is GST?

GST is the one Indirect tax which has eliminated the other indirect taxes in India. GST Law is a comprehensive, multi-stage, destination-based tax in India that had been passed into parliament on 29th March 2017. But it came into existence on 1st July 2017. It is levied on every value addition. In this regime of GST, the tax will be imposed on every step of sale whether it is intra-state sales, central GST or state GST. In the case of intra-state sales, GST will be integrated. This article will let you know how GST on NBFCs is prevailing in Indian companies. If you want to register GST then click here:

GST on NBFCs in India

There are some provisions on NBFCs under GST which are given below:

• Before GST the tax was 15% but after introducing GST it is now 18% as a GST rate for providing services.
• Before GST you used to obtain central wise GST registration but now it is state wise.
• If inter-state supplies of services between same entity branches shall also attract IGST.
• The returns for each state is 37 and 61 returns in case of ISD and TDS provision, are applicable.

Some important and noticeable points in GST on NBFCs

1. Place of supply:  The location of the supply of banking and other financial services such as stock broking services etc to any person must be the location of the recipient of services on the records of the supplier of services. It is provided in section12 (12) of IGST Act 2017 that if the location of a recipient of services is not on the records of the supplier then the place of supply shall be the location of the supplier of services.
2. Input credit tax: as per section 17 of CGST Act, there are two options available for input credit tax. Firstly, Every month 50% of the amount of eligible input tax credit on inputs as well as capital goods can be availed. The rest amount shall be lapsed as per Rule 3 of ITC. Secondly, take input tax as is attributable to the taxable supply only as per section 17(2) of CGST Act and rule 7 of ITC.

For more details regarding GST on NBFCs, you can follow our blog.

ITC Rule - 3

A non-banking financial company carrying on business in the supply of services by accepting deposits or extending loans shall not avail the credit of tax paid on inputs and inputs services that have been used for non-business purposes. Besides, it shall not be given a credit attributable to supplies specified in sub-section (5) of section 17 in form GSTR-2. The non-banking financial institution shall avail the credit of tax paid on inputs and services as per sub-section (4) of section 17. From the remaining amount of input tax, 50% shall be the input tax credit admissible for the company. It must be furnished in FORM GSTR-2. The amount mentioned in clauses (b) and (c) shall be credited to the electronic credit ledger of the institution.

Section 17(2) of CGST Act 2017

The amount of credit shall be restricted to so much of the input tax as is attributable to the said taxable supplies including zero-rated supplies, Where the goods and services are used by the registered person partly for effecting taxable supplies including zero-rated supplies as prescribed under this Act.

Section 17(4) of CGST Act 2017

If a non- banking financial institution carrying on its business by accepting deposits and extending loans then it is provided under the provision of sub-section (2) that the option once exercised shall not be withdrawn during the remaining part of the financial year. Provided further that the restriction of 50% shall not apply to the tax paid on supplies which are made by one registered person to another registered person having the same Permanent Account Number(PAN).   For further information regarding GST Registration, GST impact on startups you can visit our website: Legal Raasta you can send your query on Email: contact@legalraasta.com and give us a ring at 8750008585.

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