From The Economic Times · Anuradha Shukla · · 1m
NBFC Services Tax Rate Set
NBFC services to banks now taxed at 18% GST under RBI-aligned rules.
In brief
NBFC services to banks now taxed at 18% GST under RBI-aligned rules. The GST Council has set 18% GST on NBFC services to banks, with interest on loans exempt and valuation following RBI methodology to resolve tax ambiguities in co-lending arrangements. Originally reported by The Economic Times.
GST Council Decision
The fitment committee under the GST Council decided NBFC services to banks will be taxed at 18% GST with valuation aligned to RBI methodology.
Interest Exempt from GST
Interest on underlying loans remains exempt from GST under the new rules.
Co-Lending Tax Treatment
The 18% GST applies to NBFC services in co-lending arrangements with banks.
RBI Valuation Methodology
NBFC service valuation follows RBI's prescribed methodology to reduce tax interpretation disputes.
Notional Charges Clarified
Banks' internal fund transfers will be treated as interest for GST purposes.
Industry Impact
This clarification resolves tax ambiguities for co-lending structures and enables smoother partnerships between lenders and fintech platforms.
What to remember
The GST Council has set 18% GST on NBFC services to banks, with interest on loans exempt and valuation following RBI methodology to resolve tax ambiguities in co-lending arrangements.
