NBFCs, banks agree on GST levy on co-lending charges

Banks agree on GST levy for co-lending charges, resolving ambiguity in NBFC-bank partnership taxation. Non-banking finance companies (NBFCs) and banks have reached an agreement that co-lending charges levied by NBFCs will be subject to an 18% Goods and Service Tax (GST). This consensus resolves months of ambiguity regarding the taxation of such arrangements, recognizing the service component in these partnerships. The decision, likely to be ratified in the next GST Council meeting, will provide clarity on the tax treatment of co-lending activities, which have significantly grown under the Reserve Bank of India's (RBI) push for financial inclusion and broader credit access.