Presently, the place of provision of services provided by NBFCs to account holders is the location of the service provider. The GST Law specifies the place of supply of services for banking and other financial services as:

  • in cases where the services are linked to the account of the receiver, the location of the service receiver on the records of the service provider;
  • where the service is not linked to the account of the receiver, the location of the service provider.

Under the State VAT laws, the definition of the term, ‘goods’ specifically excludes securities. Hence, VAT is not payable on sale of securities. But under the GST Law, the term, ‘goods’ includes securities. However, it is expected that such a transaction would be covered by the negative list of supplies.

 Presently, the definition of the term, ‘service’ specifically excludes actionable claim, whereas   under the GST Law, the term, ‘service’ specifically includes actionable claim. It seems that by including actionable claim, transactions such as securitisation could be subjected to GST.

 Presently, finance lease transactions are liable to both, VAT and Service Tax, and ordinarily operating lease transactions attract VAT. Further, VAT is not payable on import of assets on lease basis. Under the GST Law, a finance lease would be considered as supply of goods, and an operating lease would be considered as a service. Further, leasing of an asset from outside India will be liable to IGST.

 Presently, as per CENVAT Credit Rules, NBFCs have options to reverse CENVAT credit either to the extent of 50%, or on proportionate basis to the extent of exempt turnover. Under the GST Law, there is no such provision for availment of 50% credit. If such option is not available, then NBFCs would be required to reverse input tax credit to the extent attributable to non-taxable supplies.

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