Скачать или смотреть Is GST Applicable on Unsecured Loans ? | CA Ashwarya Agarwal

This video explains a recent clarification issued by the department regarding the applicability of GST on unsecured loans given between related entities. The video, breaks down the scenario in detail.

Normally, when a company gives an unsecured loan to another company, interest is paid on the loan amount. However, there are other charges involved, like processing fees, markup fees, credit eligibility testing fees, etc., which a bank or financial institution would typically charge. The department's argument is that similar charges should be applied even when loans are given between related entities and GST should be paid on those deemed charges.

The circular clarifies that this is not applicable. The department cannot deem any charges when a loan is given between related parties because there is no paperwork involved and the parties are already aware of each other's financial standing. So, processing fees, credit eligibility testing fees etc. don't apply here. These transactions are completely different from the ones where a bank or financial institution lends money.

The video also explains that even if there are overseas entities involved, similar logic applies. If an overseas entity is giving an unsecured loan to an Indian entity, there might not be any charges involved. But, that transaction cannot be compared to a typical bank loan.

The speaker also mentions that the valuation provision applies only when the recipient receives some processing fees or any other charges. If there is no invoice for such charges, the value of such charges is deemed to be NIL, and hence, no GST can be charged on them.

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