GST on interest on loan

[Kaustubh Karandikar]

PQR (Mexico) is a Subsidy of XYZ (India). Loan had been given in US$ by XYZ (India) to PQR (Mexico) and the principal amount along with interest is paid back to XYZ (India) again in US $ and the same is deposited in the Indian bank having foreign currency account. Is XYZ required to pay GST on the interest amount received from PQR?

[Narendra Nimmala]

Services by way of extending loans is exempt vide entry 27 of Notification No. 12/2017- Central Tax (Rate). XYZ is not liable to pay GST

AI Summary

Indian Company XYZ Exempt from GST on Interest from Mexican Subsidiary Loan Under Entry 27, Notification No. 12/2017 XYZ, an Indian company, extended a loan in US dollars to its subsidiary, PQR in Mexico. The principal and interest are repaid in US dollars and deposited into an Indian bank's foreign currency account. The query was whether XYZ needs to pay GST on the interest received from PQR. The response clarified that services related to extending loans are exempt from GST under entry 27 of Notification No. 12/2017-Central Tax (Rate), thus XYZ is not liable for GST on the interest amount.