GST applicability on Interest Subvention receives from nationalized bank

[Sandeep Anand]

Sir,

Require a clarification whether the GST is applicable on interest subvention received from a bank for reducing the effective interest of Working capital loan (Packing credit facility). Any section or case laws supporting the above fact

Also there is a clarification required that, since GST is not applicable for Interest on working capital loan, whether the subvention received for the same is applicable for GST

[KASTURI SETHI]

Interest subvention is a subsidy and GST on subsidy is not applicable if granted by Central Govt. or Statement. See the definition of 'Consideration' under Section 2 (31) of CGST Act. In your case, it is taxable. Peruse the following decision of AAR:-

2019 (26) G.S.T.L. 269 (A.A.R. - GST) = 2019 (7) TMI 810 - AUTHORITY FOR ADVANCE RULING, TAMILNADU IN RE : DAIMLER FINANCIAL SERVICES INDIA PVT. LTD.

[Sandeep Anand]

Sir,

In our case subsidy is received from Bank as per RBI Scheme (interest equalization scheme)

Since RBI comes under Central Government, whether we require to pay GST.

[KASTURI SETHI]

Bank is not fully Govt. body. It is Govt of India undertaking.

[KASTURI SETHI]

Dear Querist, You are right. RBI is fully Govt. All other banks are Govt.of India undertakings. Interest subvention is actually borne by Central Govt. Bank is only via medium (channel) through which you get interest subvention. Discussed the whole issue with retired Bank Officer. Since this subsidy is borne by Central Govt., GST is NOT applicable.

[Sandeep Anand]

Thank you Sir for your valuable information

AI Summary

GST Not Applicable on Interest Subvention from RBI's Interest Equalization Scheme; Considered Central Government Subsidy A discussion on a forum addressed whether GST applies to interest subvention received from a nationalized bank under the RBI's interest equalization scheme. The query sought clarification on GST applicability, given that GST is not levied on interest from working capital loans. A respondent explained that interest subvention is considered a subsidy, which is not subject to GST if provided by the Central Government. Since the subsidy is borne by the Central Government and banks act merely as intermediaries, GST is not applicable. The discussion concluded with gratitude for the clarification provided.