GST On Financial Inclusion Services by BC’s Likely To Come Under Review

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Published on: 19 December 2018 | The Hindu Business Line

The issue is likely to be taken up at the GST Council meeting on December 22

With the government focussing on financial inclusion, the Goods and Services Tax (GST) Council is expected to bring to nil GST on services, including small-value remittances that are carried out by business correspondents (BCs).

At present, GST of 18 per cent is levied on these services but the industry has been pointing out that it creates additional burden, which has to be borne either by the bank or the BC agent.

The total fee charges for such services is capped at 1.5 per cent for banks and BCs. On this, the bank and the BC have to pay 18 per cent GST, while the outlet or the service point is exempt for fees up to ₹20 lakh.

Sources said the Fitment Committee of officials of the GST Council has been examining the issue, and is likely to be taken up by the council at its meeting on December 22.

Domestic remittances

According to industry sources, many private banks are keen to restructure their domestic remittances business or even shut shop, and big private sector bank has already shut down its domestic remittances business. Further, tax notices have also been sent to some banks. The Business Correspondent Federation of India (BCFI), which has been in talks with the Finance Ministry over the issue, has suggested that all 12 financial inclusion services notified by the Reserve Bank of India (RBI) for delivery by BCs should attract zero GST.

Apart from receipt and delivery of small-value remittances, these services include collection of small-value deposits, identification of borrowers, processing and submitting applications to banks, disbursal of small-value credit, and recovery of principal and interest.

“We are confident that the existing interpretation gaps, which result in taxing the poor, will be resolved by the government. It cannot be the government’s intent to promote financial inclusion, (on the one hand), and on the other, impose a 27 per cent GST on poor citizens,” said Anand Shrivastav, Chairman, BCFI.

Anand Bajaj, Co-Chair BCFI Communications Committee, also said the government should levy nil GST on works of financial inclusion through BCs for all inclusion services offered from Agent BC outlets. At present, there are about 7.87 lakh BC in the country.

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