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Jun 28, 2024
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Major GST relief for foreign holding cos in intra-loan transactions
In a relief for foreign firms giving loans to Indian subsidiaries, tax authorities have said goods and services tax (GST) will not be imposed on them, subject to some caveats.
Additional fees, commissions, or related payments — over and above the amount charged as interest — on these loans will attract GST at 18 per cent, the Central Board of Indirect Taxes and Customs (CBIC) has said.
The move is expected to end uncertainties on taxing loans/credit among group companies -- a matter plaguing foreign entities.
The issue arose during GST audits and resulted in tax notices being served.
In taxation terms, the matter involved valuing services of foreign affiliates when the Indian recipient can claim full input tax credit (ITC).
The CBIC has said the open market value of such services can be the invoiced amount by the Indian company, assuming full ITC is available.
If no invoice exists, the service value can be considered nil.
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