Clarification regarding tax ability 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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....lated person -reg. Ref: 1. Central Circular No.218/12/2024-GST, dated 26.06.2024 issued by the Government of India, Ministry of Finance, Department of Revenue Central Board of Indirect Taxes and Customs, New Delhi. 2. G.O.Ms.No.588, Revenue(CT) Department, dated 12.12.2017. *** Representations have been received from trade and industry seeking clarity on whether there is any supply involved in the transaction of granting of loan by a person to a related person or by an overseas affiliate to its Indian entity, where the consideration being paid is only by way of interest or discount, and whether any GST is applicable on the same. 2. In order to clarify the issue and to ensure uniformity in the implementation of the provisions ....

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....ub entry (a) of entry 27 of G.O.Ms.No.588, Revenue (CT) Department, dated 12.12.2017. Therefore, it is clear that the supply of services of granting loans/credit/ advances, in SO far as the consideration is represented by way of interest or discount, is fully exempt under GST. 3. It is mentioned that overseas affiliates or domestic related persons are generally charging no consideration in the form of processing fee/ service fee, other than the consideration by way of interest or discount on the loan amount. Doubts are being raised regarding the taxability of the services of processing/ administering/ facilitating the loan in such cases, by deeming the same as supply as per clause (c) of sub-section (1) of section 7 of the APGST Act, rea....

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.... the collateral offered may also be required to be carried out. To cover such costs, the independent lender generally collects a fee that is in the nature of processing fee/administrative charges/ service fee/ loan granting charges, which is leviable to GST. 5. However, when an entity is extending a loan to a related entity, it may not require to follow such processes as are followed by an independent lender. For example, it may not need to go through the same process of information gathering about the borrower's business, his financial standing and credibility and other details, as the required information may already be readily available within the group, or between related persons. The lender may not also take any collateral from ....