Taxability of Loan Transactions between Overseas and Indian Affiliates

Last updated: 28 June 2024

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This notification from the CBIC clarifies the Goods and Services Tax (GST) implications for loans provided by an overseas affiliate to an Indian affiliate, or between related persons. It addresses whether such transactions, where consideration is solely interest or discount, are considered a supply subject to GST. The clarification aims to ensure consistent application of GST laws.

F. No. CBIC-20001/4/2024-GST
Government of India
Ministry of Finance
(Department of Revenue)
Central Board of Indirect Taxes and Customs
GST Policy Wing
*****

North Block, New Delhi
Dated the 26th June 2024

To,
The Principal Chief Commissioners/ Chief Commissioners/ Principal Commissioners/ Commissioners of Central Tax (All)
The Principal Directors General/ Directors General (All)

Madam/Sir,

Subject: Clarification regarding taxability of the transaction of providing loan by an overseas affiliate to its Indian affiliate or by a person to a related person- reg.

Representations have been received from trade and industry seeking clarity on whether there is any supply involved in the transaction of granting of loan by a person to a related person or by an overseas affiliate to its Indian entity, where the consideration being paid is only by way of interest or discount, and whether any GST is applicable on the same.

2. In order to clarify the issue and to ensure uniformity in the implementation of the provisions of law across the field formations, the Board, in exercise of its powers conferred by section 168 (1) of the Central Goods and Services Tax Act, 2017 (hereinafter referred to as “CGST Act”), hereby clarifies the issues as under:

For full notification please refer to the attachment.

FAQ :

The notification clarifies the taxability of loan transactions between overseas and Indian affiliates, and between related persons, under GST.

It covers loans provided by an overseas affiliate to its Indian entity, or by any person to a related person, where the only consideration is interest or discount.

The notification seeks to clarify whether GST is applicable on such transactions where the consideration is only interest or discount.

This clarification is issued by the Central Board of Indirect Taxes and Customs (CBIC), Ministry of Finance, Government of India.

The purpose is to clarify the issue and ensure uniform implementation of GST provisions regarding these loan transactions.