Related Party Trnasactions

[Kaustubh Karandikar]

XYZ(Proprietor) received Interest free loan from PQR (HUF). Both XYZ and PQR are related. Will it have any GST implications? Loan being given without charging any interest and XYZ and PQR being related, will it not amount to service provided by PQR to XYZ and for related person even without consideration, GST is required to be paid and in that case, whether PQR liable to pay GST?

AI Summary

Interest-Free Loans Between Related Parties Exempt from GST as per Notification 12/2017 CT(R); No ITC Reversal Needed. A query was raised about the Goods and Services Tax (GST) implications of an interest-free loan given by PQR (HUF) to XYZ (Proprietor), who are related parties. The concern was whether this transaction would be considered a taxable service under GST. The response clarified that according to notification no. 12/2017 CT(R), such interest-free loans, even to related parties, are exempt from GST. Therefore, the loan is considered an 'exempted supply,' and there is no need for the reversal of common Input Tax Credit (ITC) under the relevant CGST rules.