CBIC resolves the matter by issuing a circular, stating that no GST on punitive charges levied by banks
CBIC: CBIC also clarified through a circular that GST will not be levied even if payment aggregators provide payments up to Rs 2000 on online payment platforms.
The Central Board of Indirect Taxes and Customs (CBIC) has clarified that Goods and Services Tax is not charged on punitive charges levied on customers by banks and non-banking financial companies (NBFCs). CBIC also clarified through a circular that no GST would be charged even if the payment aggregators provided payments up to Rs 2000 on online payment platforms.
The circular said punitive charges levied by units governed by the Reserve Bank are of the nature of being levied due to violation of the terms of the contract, hence GST will not be levied on them. CBIC said, in line with the recommendations of the 55th GST Council, it is clarified that no GST is payable on the penalty charges imposed on borrowers by regulated units for violating the terms and material conditions of loan contracts.
At present, banks levy GST on their customers along with charging penalty charges. But now after the clarification of CBIC, customers will get relief.
AMRG & Associates Senior Partner Rajat Mohan said that this clarification is very important as it will eliminate disputes at the ground level. Mohan said, recognizing that contracts are meant to be completed, not broken, the GST Council had thus ended the ambiguity regarding taxation on charges.
