The government, under the leadership of Vivek Joshi, is set to address the pressing concerns about the Goods and Services Tax (GST) on NBFC co-lending arrangements with non-banking financial companies. These concerns focus on potential distortions and increased lending costs.
A clarification on the matter is expected after a thorough review. In a recent meeting with finance ministry officials, representatives from banks, NBFCs, the Finance Industry Development Council (FIDC), and the Microfinance Institutions Network (MFIN) highlighted the issues arising from GST authorities serving notices to co-lenders. These notices suggest that the co-lending model constitutes a taxable service, attracting an 18% GST.
The industry contends that co-lending is not a service and should not be taxed. Vivek Joshi, Secretary of the Department of Financial Services, chaired the meeting where the issue was discussed in detail. ‘Banks and NBFCs raised their concerns regarding GST on the co-lending arrangement as many have received communication in this regard from the Directorate General of GST Intelligence’ said a senior executive who attended the meeting, on condition of anonymity. Officials have assured that they will look into the matter.
The FIDC had previously sought clarity from the government on this issue. The industry awaits the government’s response to ensure that the NBFC co-lending model continues to thrive without the burden of additional taxes. For more GST registration and GST related information get in touch with our experts today.
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