The definition of goods and supply under sections 2(52) and 2(102) of the CGST Act, exclude money to money transactions. Loan transactions being money to money transactions are therefore not subject to GST.
Further, the GST Council has also exempted money to money transactions in the Schedule of GST rates for services[1]. Entry 8 of the list of exempted services states:
Services by way of— (i) 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); (ii) inter se sale or purchase of foreign currency amongst banks or authorised dealers of foreign exchange or amongst banks and such dealers.
Therefore, interest charged on loan transactions shall not be subject to GST.
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