The department clearifies that keeping GST free banking services like ATM withdrawals and cheque book issuance outside the ambit of GST has put to rest the confusion prevailing over the issue.
New delhi: In Banking sector so many Banking services going to be charge Free, like ATM withdrawals, provided by banks to customers will not attract GST, but late payment charges on outstanding credit card bills and purchase of insurance policies by NRIs will attract the levy.
In the new regime Goods and Services Tax (GST) on stock brokers, insurance and banking sectors, the revenue department has clarified that transactions relating to securitisation, derivatives, future and forward contracts are exempt.
Last month, the Department of Financial Services had approached the revenue department seeking exemption of these transactions from GST after the banks received service tax notice for free services offered to their clients.
On the levy of GST on insurance policies purchased by NRI’s, it said the amounts from Non-Resident External Accounts are paid in Indian Rupees and are not received in convertible foreign exchange.
“Therefore, the conditions for export of services as provided under section 2(6) of IGST Act, 2017 are not satisfied. Life Insurance services in such cases would be treated as inter-State supplies and subject to GST,” it said.
On whether GST will be levied on the exit-load of mutual funds, the department said 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,” the FAQ said.
Besides, late payment of dues on credit card outstanding as well as interest on a finance lease transaction are taxable under GST.
The FAQ (frequently asked question) explained finance lease as a method of borrowing against the asset. The interest represents the time value of the money expended by the bank in financing the asset.
Pratik Jain PwC Partner & Leader Indirect Tax, said the FAQs are very significant as globally the financial service sector is considered as most complex from GST standpoint.
“Transactions relating to securitisation, derivatives, future and forward contracts have been clarified to be exempt from GST, which have been debated since introduction of GST. While few aspects such as taxability of transactions between Indian and overseas offices of same bank still need some more clarity, industry would welcome the government’s initiative,” Jain said.
No GST For International Passengers on duty free shops
The Ministry of Finance has written to the Chief Commissioner of Customs insisting that Integrated Goods and Services Tax (IGST) should not be applied to purchases made in duty free shops.
The letter relates to a recent decision by the Authority for Advance Ruling (AAR) which said IGST should be applied to sales at Rod Retail. The company runs a Sunglass Hut duty paid shop in Delhi Indira Gandhi International Airport Terminal 3. That ruling led to numerous Indian media reports claiming that duty free stores would also be hit with IGST.
Citing the ruling, Indira Gandhi International Airport’s Deputy Commissioner wrote to various duty free retailers requiring them to pay ISGT on goods sold since 1 July 2017.