Facts: – ‘A’ Ltd. given a loan to ‘B’ Ltd. ‘B’ Ltd. paying interest to ‘A’ Ltd on a loan taken from ‘A’ Ltd.
Issue under consideration:-
• Whether GST is leviable on Interest Income earned by ‘A’ Ltd.
• If yes then what is the rate of GST
Legal Provisions:-
• Under GST, Supply is considered a taxable event for charging tax. The liability to pay tax arises at the ‘time of supply of goods or services’. Thus, determining whether or not a transaction falls under the meaning of supply, is important to decide GST’s applicability.
• Supply includes sale, transfer, exchange, barter, license, rental, lease and disposal. If a person undertakes either of these transactions during the course or furtherance of business for consideration, it will be covered under the meaning of Supply under GST.
• Supply has two important elements:
a) Supply is done for a consideration
b) Supply is done in course of furtherance of business
• Notification No. 12/2017- Central Tax (Rate) dt. 28.06.2017 and Notification No. 9/2017-Integrated Tax (Rate) dt. 28.06.2017 as amended, provides a list of services exempted from payment of Central Tax on intra-State supply and Integrated Tax on Inter-State supply. Entry 27(a) of the Notification No. 12/2017 and Entry 28(a) of the Notification No. 9/2017 relates to services by way of extending deposits, loans or advances in so far as the consideration is represented by way of interest.
Conclusion:-
The services under consideration is covered under the above Notification. Therefore, such services are exempted from payment of GST and the lending company is not required to discharge GST on the activity of providing services by way of extending deposits, loans or advances where the consideration is represented by way of interest.
Therefore in given case GST is not leviable on Interest Income earned by ‘A’ Ltd.
Hope the above Article serve your purpose.
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