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TMI BlogClarification regarding taxability of the transaction of providing loan by an overseas affiliate to its Indian affiliate or by a person to a related personX X X X Extracts X X X X X X X X Extracts X X X X ..... d Customs (CBIC) has issued the above referred Circular. For the uniformity, it has been decided that the said Circular issued by the CBIC is being made applicable, mutatis mutandis, in implementation of the MGST Act, 2017. Copy of the referred CBIC Circular is attached herewith. This Trade Circular is clarificatory in nature. Difficulty if any, in the implementation of this Circular may be brought to the notice of the office of the Commissioner of State Tax, Maharashtra. (ASHEESH SHARMA) Commissioner of State Tax, Maharashtra State, Mumbai Circular No. 218/12/2024-GST F. No. CBIC-20001/4/2024-GST Government of India Ministry of Finance (Department of Revenue) Central Board of Indirect Taxes and Customs GST Policy Wing ***** North Block, Ne ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... charges etc., and the consideration is represented only by way of interest or discount, will be treated as a taxable supply of service under GST or not. 1. As per clause (c) of sub-section (1) of section 7 of the CGST Act, read with S. No. 2 and S. No. 4 of Schedule I of CGST Act, supply of goods or services or both between related persons, when made in the course or furtherance of business, shall be treated as supply, even if made without consideration. Therefore, it is evident that the service of granting loan/ credit/ advances by an entity to its related entity is a supply under GST. 2. Services by way of extending deposits, loans or advances in so far as the consideration is represented by way of interest or discount (other than interes ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... essing/ service fee is generally charged by the bank/ financial institution from the recipient of the loan in order to cover the administrative cost of processing the loan application. An independent lender may carry out a thorough credit assessment of the potential borrower to identify and evaluate the risks involved and to consider methods of monitoring and managing these risks. Such credit assessment may include understanding the business of the applicant, as well as the purpose of the loan, financial standing and credibility of the applicant, how it is to be structured and the source of its repayment which may include analysis of the borrower s cash flow forecasts, the strength of the borrower s balance sheet, and where any collateral i ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... mount of loan granted, as well as based on the relationship between the lender and the concerned person taking the loan. 7. Accordingly, in the cases, where no consideration is charged by the person from the related person, or by an overseas affiliate from its Indian party, for extending loan or credit, other than by way of interest or discount, it cannot be said that any supply of service is being provided between the said related persons in the form of processing/ facilitating/ administering the loan, by deeming the same as supply of services as per clause (c) of sub-section (1) of section 7 of the CGST Act, read with S. No. 2 and S. No. 4 of Schedule I of CGST Act. Accordingly, there is no question of levy of GST on the same by resorting ..... X X X X Extracts X X X X X X X X Extracts X X X X
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