CA Final · Indirect Tax Laws · Exemptions from GST
Kaveri Finance Ltd, an NBFC, sanctions a loan of ₹10,00,000 to a customer. In the month it earns interest of ₹1,20,000 on the loan, a processing fee of ₹10,000 and documentation charges of ₹4,000. Assuming GST at 18% on taxable financial services and that interest on loans is exempt, what is the GST payable on these receipts?
GST payable is ₹2,520. Interest on the loan is exempt, but the processing fee of ₹10,000 and documentation charges of ₹4,000 are taxable, giving a taxable value of ₹14,000, and 18% of that is ₹2,520.
- A₹2,520Correct
- B₹24,120
- C₹21,600
- D₹1,800
Explanation
Interest on loans is exempt, but processing fee and documentation charges are consideration for separate services and are taxable. Taxable value = 10,000 + 4,000 = ₹14,000; GST at 18% = ₹2,520. ₹24,120 wrongly taxes interest as well; ₹21,600 taxes only interest; ₹1,800 omits the documentation charges.
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