Section 281 of IT ACT VS BANK LOAN

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Borrowers are often asked by banks to provide an Income Tax Act Section 281 certificate before granting a loan. This is because the Income Tax department has the authority to invalidate sales or mortgages. The certificate essentially confirms they have no objection. While GST is also a statutory authority, it doesn't possess the same power to nullify financial agreements, hence the absence of a similar requirement for GST clearance.

Jayanta Bandyopadhyay

Jayanta Bandyopadhyay (Querist)

05 March 2025 Bank asks borrower to obtain IT Certificate under section 281 of Act. But Dept does not issue. At the same time,,GST holds higher stake. Then why not Lending bank asks similar Certificate from GST dept. Both are Statutory Auth.
Kindly guide.

Nikhil Kaushik

Nikhil Kaushik (Expert)

05 March 2025 have you applied and IT department rejected your application?

Nikhil Kaushik

Nikhil Kaushik (Expert)

05 March 2025 the reason IT certificate is requested is becuase Income-tax department has the power to nullify any such sale or lein/mortgage. So the lender ask for this certificate as a permission by the IT department that they no objection to such a mortgage being created.

GST department does not have similar powers. Hence, no such requirement.

Jayanta Bandyopadhyay

Jayanta Bandyopadhyay (Querist)

05 March 2025 Yes. Last year we did apply but no response. My query is that GST conventionally have higher Stake than IT. Then why not any such permission from them. Banka are clueless

Nikhil Kaushik

Nikhil Kaushik (Expert)

05 March 2025 as explained above. i dont even understand why do you want another bureaucratic dealing with GST!

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