FM: No GST on bank loan penal charges, gene therapy

In a major relief to borrowers, the Goods & Services Tax (GST) Council on Saturday decided no GST would be payable on loan penal charges levied by banks or financial institutions.

Advertisement

Penal charges refer to the fee imposed on borrowers for failing to adhere to loan conditions, such as missing an EMI payment or breaching repayment schedules.

The council meeting, which was held in Jaisalmer, was chaired by Finance Minister Nirmala Sitharaman.

Addressing the media after the 55th meeting of the council, Sitharaman said, “No GST will be levied on penal charges imposed by banks and non-banking financial companies on borrowers for non-compliance with loan terms.”

Besides Minister for State for Finance Pankaj Chaudhary, CMs and Deputy CMs of a number of states and UTs were present in the meeting.

The council has approved the reduction of GST on rice kernels to 5 per cent, exempted life-saving gene therapy from tax and increased the tax on caramelised popcorn to 18 per cent.

It deferred a decision on exempting or reducing the GST on health and life insurance premium, as the ministers’ panel needs more time to reach a consensus.

Addressing the media, the FM said, “The Group of Ministers (GoM) needs more time, as they are yet to receive inputs from the Insurance Regulatory and Development Authority of India.”

She clarified that payment aggregators handling transactions below Rs 2,000 get GST exemptions. Payment aggregators facilitate online payments by pooling funds from customers and transferring them to merchants. However, the exemption does not extend to payment gateways or fintech services.

The council also deliberated on the GST on delivery charges by food delivery apps such as Swiggy and Zomato. Currently, food delivery companies do not pay the GST on delivery charges. The FM said no decision had been taken yet on the issue.

It also took up the issue of bringing aviation turbine fuel (ATF) under the GST ambit. “States do not want the ATF under the GST because they see it as part of the crude-petroleum-diesel basket,” she said. The council has agreed to form a GoM to determine the procedure and system for implementing a 1 per cent calamity cess on certain goods and services. The cess would help states recover from natural disasters.

The FM said the council had also deferred the decision with regard to rate rationalisation as more time was required by the GoM for a comprehensive study.

A big relief for the MSMEs would be the New GST registration process, which would be launched soon. Sitharaman said the council aimed to promote electric vehicles (EVs) by imposing a 5 per cent GST on new EVs. Regarding used EVs, she said 18 per cent tax (to the margin value between the purchase price and the selling price of a used car) would be levied when a firm purchases a used EV or when a seller modifies an EV for resale. No GST would be payable if the transaction is between individuals.