Purchase of insurance policies by NRIs attracts GST, clarifies Government

Free banking services provided to customers who maintain a minimum balance account will not attract GST, the government clarified in a Frequently Asked Questions document. ATM withdrawals will not attract GST, but the purchase of insurance policies by NRIs and late payment charges on outstanding credit card bills will attract GST.

Last month, the Department of Financial Services had approached the revenue department seeking exemption of these transactions from GST after the banks received service tax notice for free services offered to their clients.

Clarifying whether, services supplied without consideration to a recipient other than ‘related party’/’distinct person’ taxable, the FAQ said Section 7 of the CGST Act, 2017 provides that services supplied without consideration to related persons or distinct persons only would qualify as ‘supply’.

“Therefore, where the services are supplied by a supplier without consideration to an unrelated recipient or a person other than a related or distinct person, the same would not amount to supply and not liable to GST,” it said.

On the levy of GST on insurance policies purchased by non-resident Indians (NRIs), it said the amounts from Non-Resident External Accounts are paid in Indian rupees and are not received in convertible foreign exchange.

“Therefore, the conditions for export of services as provided under section 2(6) of IGST Act, 2017 are not satisfied. Life Insurance services in such cases would be treated as inter-State supplies and subject to GST,” it said.

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