Circular No. 86/05/2019- GST 1
F. No. 354/428/2018-TRU
Government of India
Ministry of Finance
Department of Revenue
Tax research Unit
Room No. 156, North Block,
New Delhi, the 1st January, 2018
The Principal Chief Commissioners/ Chief Commissioners/ Principal Commissioners/
Commissioner of Central Tax (All) /
The Principal Director Generals/ Director Generals (All)
Subject: GST on Services of Business Facilitator (BF) or a Business Correspondent (BC) to Banking Company- reg.
Representations have been received seeking clarification on following two issues:
(i) What is the value to be adopted for the purpose of computing GST on services provided by BF/BC to a banking company?
(ii) What is the scope of services provided by BF/BC to a banking company with respect to accounts in its rural area branch that are eligible for existing GST exemption?
2. The matter has been examined. The issues involved are clarified as follows:
2.1 Issue 1: Clarification on value of services by BF/BC to a banking company: As per RBI’s Circular No. DBOD.No.BL.BC. 58/22.01.001/2005-2006 dated 25.01.2006 and subsequent instructions on the issue (referred to as ‘guidelines’ hereinafter), banks may pay reasonable commission/fee to the BC, the rate and quantum of which may be reviewed periodically. The agreement of banks with the BC specifically prohibits them from directly charging any fee to the customers for services rendered by them on behalf of the bank. On the other hand, banks (and not BCs) are permitted to collect reasonable service charges from the customers for such service in a transparent manner. The arrangements of banks with the Business Correspondents specify the requirement that the transactions are accounted for and reflected in the bank's books by end of the day or the next working day, and all agreements/ contracts with the customer shall clearly specify that the bank is responsible to the customer for acts of omission and commission of the Business Facilitator/Correspondent.
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