XYZ(Proprietor) received Interest free loan from PQR (HUF). Both XYZ and PQR are related. Will it have any GST implications?
ANSWER
Facts of the case:
1. Loan is Interest-free (Since this is interest-free loan therefore no consideration is involved.)
2. Parties are related
3. It is not mentioned whether the loan is advanced in course of furtherance of business or not. (so we shall discuss both the cases)
Law:
As per para 2 of Schedule I
"Supply of goods or services or both between related persons or between distinct persons as specified in section 25, when made in the course or furtherance of business:" shall be deemed to a supply even if no consideration is involved.
Interpretation:
Case 1: If loan is made in course or furtherance of business
Then this is deemed to be supple as per schedule I.
Case 2: If loan is not made in course or furtherance of business
Then Schedule I is not applicable and this is not a supply.
Exemption:
As per entry number 27 in Notification No. 12/2017 of CGST
Services by way of
(a) extending deposits, loans or advances in so far as the consideration is represented by way of interest or discount (other than interest involved in credit card services);
shall be exempt from GST.
Conclusion: Although Case 1 is taxable as a supply but exemption is available in case of Interest on advancing loans. Therefore in all the cases no GST shall be levied.
CAclubindia
