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| GST Applicability on Priority Sector Lending Certificates |
1. What is the Priority Sector Lending Certificate (PSLC)?
Ans. Lending by a commercial bank for certain sectors such as Agriculture, MSME, Education, Housing etc. which are identified as “priority sector” by the central bank (Reserve Bank of India) is called as priority sector lending.
It is mandated in India that Priority sector lending (PSL) should constitute 40 percent of Adjusted Net Bank Credit or Credit Equivalent Amount of Off-Balance Sheet Exposure, whichever is higher. Sub-targets are specified for certain sectors like 18% to agriculture with 8% to small and marginal farmers, 7.5% to micro units etc.
Priority Sector Lending Certificates (PSLCs) are tradable certificates issued against priority Sector loans of banks so as to enable banks to achieve their specified target and sub-targets for priority sector lending through the purchase of these instruments in the event of a shortfall and at the same time incentivizing the surplus banks to lend more to these sectors.
2. Applicability of GST on trading of such PSLC.
Ans. CBIC had issued clarification vide circular 62/36/2018 clarifying that GST
a. GST For 01/07/2017 to 28/05/2018 - on Forward Charge basis by the seller banks - At 12%
b. GST for a period on or 29/05/2018 - On Reverse Charge basis by Purchaser Bank - At 12%
3. Whether trading of PSLC considered as Intrastate or Interstate?
Ans. It is further clarified that the nature of the supply of PSLC between banks may be treated as a supply of goods in the course of inter-State trade or commerce. Accordingly, IGST shall be payable on the supply of PSLC traded over the e-Kuber portal of RBI for both periods i.e 01.07.2017 to 27.05.2018 and from 28.05.2018 onwards. However, where the bank liable to pay GST has already paid CGST/SGST or CGST/UTGST as the case may be, such banks for payment already made, shall not be required to pay IGST towards such supply.
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