GST relief for co-lending on PSB Manthan agenda

The contentious issue of levying 18% Goods and Services Tax (GST) on services provided by non-bank finance companies (NBFCs) to banks in co-lending arrangements may be discussed in the two-day conclave of public sector banks (PSBs) organised by the department of financial services from Friday.

- PRASANTA SAHU

THE CONTENTIOUS ISSUE of levying 18% Goods and Services Tax (GST) on services provided by non-bank finance companies (NBFCs) to banks in co-lending arrangements may be discussed in the two-day conclave of public sector banks (PSBs) organised by the department of financial services from Friday.

Currently, NBFCs largely source loan proposals in co-lending with banks. However, no GST is being paid on the service charges, as NBFCs argue that extra interest earned by them in such cases is "income."

Typically, in co-lending arrangements (CLAs), sourcing NBFCs finance 20% of the loan amount to the customer, while banks finance 80%.