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GST on interest.. (loans and advance)

NAGA (ACCOUNTANT) (504 Points)

27 September 2020

Sir, our firm given loan to some other firm transfer through firm account and the amount return after 10 days Or 20 days with interest. Can i pay GST on interest portion.pls explain

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9 Replies

Sagar Patel (Tax and Business Consultant) (11611 Points)
Replied 27 September 2020

No, interest on Loans and Advances is Exempt from GST. So, you are not required to pay any GST on interest income..

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Munganda chandrashekar (8 Points)
Replied 27 September 2020

Interest on loan is exempted as per act

NAGA (ACCOUNTANT) (504 Points)
Replied 27 September 2020

Sir are you sure, I think it is exempted only financial institutions and nbfc

CA Kushwanth AVSR (CA in Practice CMA by Qualification) (1593 Points)
Replied 27 September 2020

No need to pay GST, the same was exempted in GST via notification 12/2017 CT(R) dt. 28-06-2017

In the Entry 27 of the notification it was given that:
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);
(b) inter se sale or purchase of foreign currency amongst banks or authorised dealers of foreign exchange or amongst banks and such dealers.

In the entry no where specified that it applicable only to the the financial institutions. So, there is no GST on such income.

Sagar Patel (Tax and Business Consultant) (11611 Points)
Replied 27 September 2020

Interest on Loans and Advances is Exempt from GST for all including financial institutions, bank, all other business concern and persons.

Shivam RC (Student) (23683 Points)
Replied 27 September 2020

As per Mega Exemption Notification No. 12/2017 - Central Tax ( Rate ), dated 28th June 2017 read with Section 11 of the CGST Act 2017, Interest on Loans and Advances is EXEMPTED from GST.

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