NBFC services to banks will face 18% GST
In short
NBFC services to banks in co-lending deals will be charged 18% GST, according to a reported committee decision. The interest on the loan itself stays GST-free, and the service value will follow RBI-linked rules.
This could change costs for banks and NBFCs in these deals. The reporting does not say when the change starts or how much it may affect customers.
What the reporting says
NBFC services supplied to banks in co-lending arrangements will attract 18% GST, according to a committee decision reported by Economic Times Banking Finance. The interest on the underlying loan remains exempt, and the levy applies only to the taxable service from the NBFC to the bank. The committee also aligned valuation with the RBI methodology. What happens next for pricing and implementation is not stated.
Why it matters
The reported committee decision affects NBFCs and banks using co-lending arrangements by taxing the service layer at 18% while keeping underlying loan interest exempt. It also ties valuation to RBI methodology, which may affect how the tax is calculated. The reporting does not state timing, enforcement details, or which institutions will be immediately affected.