Banking company is liable to pay GST on the entire value of service charges

Banking company is liable to pay GST on the entire value of service charges


The board, vide circular no. 86/05/2019-GST dated 1st January, 2019, has clarified various issues with respect to services of BF or BC to the banking company and the same is highlighted in the current article. Banking company to pay GST on the entire value of service charges.

Banking company is liable to pay GST on the entire value of service charges

  • Services are provided by the BF/BC to the customers on behalf of the banking company.
  • As per the agreement between the bank and the BC, BC cannot directly charge any fee to the customer. In fact, banks are permitted to collect reasonable service charges from the customer for such services in a transparent manner.
    Further agreement with the customer specifically mentions that bank is responsible for the acts of omission and commission of the BF/BC.
  • In view of above, it has been clarified that the banking company is the service provider and the banking company is liable to pay GST on the entire value of service charges / fee charged to the customer whether or not received via BF or BC.

Clarification on scope of Services by BF/BC to a Banking Company

  • Sr. No. 39 to notification no. 12/2017 – Central Tax (Rate) dated 28th June, 2017, provides exemption from GST to services falling under heading 9971 provided by the BF/BC to a banking company with respect to accounts in its rural area branch.
  • In order to claim the above exemption, services provided should mandatory be with respect of accounts in a branch located in the rural area of the banking company.
  • It is clarified that the guidelines provided by the RBI would be accepted in order to classify the branch of a bank in the rural area and exemption would be applicable accordingly.

Know more about SEIS Export Incentive

DISCLAIMER: The views expressed are strictly of the author and VJM & Associates LLP. The contents of this article are solely for informational purpose. It does not constitute professional advice or recommendation of firm. Neither the author nor firm and its affiliates accepts any liabilities for any loss or damage of any kind arising out of any information in this article nor for any actions taken in reliance thereon.

Share on facebook
Share on twitter
Share on linkedin
Share on whatsapp

Need help?

Do you need help to understand the impact of this article, just write us!

Related Post
SEIS Export Incentive

[toc] 1. What is SEIS (Service Exports from India Scheme) Under the Foreign Trade Policy, the ‘Exports from India Scheme’ Read more

Resignation of Auditor | Intimation to ROC | ADT-3 E Form

Registrar of Companies (“RoC”) is the public body which maintains all information about the companies. Information about resignation of Auditor Read more

Information about appointment or Removal of Director | DIR 12

Director is a person, appointed by members of the company, for carrying out operations in the company. Directors are those Read more

Want to talk to us

Leave your Name, email, Phone number along with what you are looking for in message box or you can call us at 011-41715118

V J M & Associates LLP

Contact Us