Clarification regarding taxability of the transaction of providing loan by an overseas affiliate to its Indian affiliate or by a person to a related person
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GST treatment of related party loans: interest only consideration exempt, separate processing fees are taxable services. Under the CGST Act, supply between related persons is treated as supply, but services of extending loans where consideration is only interest or discount are exempt; therefore loans between related parties charging only interest/discount do not attract GST, whereas any separate processing or administrative fees charged in addition to interest constitute taxable consideration for supply of services and are liable to GST.
Cases where this provision is explicitly mentioned in the judgment/order text; may not be exhaustive. To view the complete list of cases mentioning this section, Click here.
Provisions expressly mentioned in the judgment/order text.
GST treatment of related party loans: interest only consideration exempt, separate processing fees are taxable services.
Under the CGST Act, supply between related persons is treated as supply, but services of extending loans where consideration is only interest or discount are exempt; therefore loans between related parties charging only interest/discount do not attract GST, whereas any separate processing or administrative fees charged in addition to interest constitute taxable consideration for supply of services and are liable to GST.
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