A recent circular addressed the taxability of loans between ...

The circular clarifies various receipts from loans between related parties as taxable under GST. Interest on loans is exempt, but processing fees may be subject to GST.

Circulars     GST

June 27, 2024

A recent circular addressed the taxability of loans between related parties or affiliates. The circular clarifies that providing loans between related parties constitutes a taxable supply under GST. However, services involving interest or discount on loans are fully exempt. Processing fees or administrative charges on loans may be subject to GST, but in cases where no such fees are charged, no GST applies. Fees charged by lenders to related parties beyond interest or discount are considered taxable. The circular emphasizes the distinction between loans provided by related parties and independent lenders, noting differences in processing requirements. It advises issuing trade notices to disseminate the circular's contents and invites feedback on implementation challenges.

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