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Financial services

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Financial services

Post by Edin on Wed Jan 14, 2015 9:18 am

I would like to get some opinion about "Financial services" under Exempt Order 2014. I'm a bit confused since there is no enough explanations for financial services (like in Singapore). My company is in construction industry, doing purely standard rate supply but extra cash we put into banks FD or land to our sister / subsidiary company as loan or advance. For both, FD and advances we receive interest, so my doubt is are we now making exempt supply or not, since providing financial services is not my core business but it is under Exempt Order 2014. If we are making exempt supply by having interest income than we have to use complicated partial exemption rule to claim input tax. But if I'm not falling under mixed supplier, which tax code shall I use once booking my income from FD interest, since in Custom user guide under code ES43 is written that is applicable only for mix supplier.

Edin

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Re: Financial services

Post by joseph on Thu Jan 15, 2015 3:08 pm

Regulation 40 of the GST Regulations 2014: input tax attributable to incidental exempt financial supplies shall be treated as input tax attributable to taxable supplies, if such supply is made by non-financial institutions.

Having incidental exempt financial supply does not make a supplier mixed supplier.

Ignore Customs's explanation on the tax code that ES43 is for mixed suppliers only. That's not entirely true.

Every GST Consultant recommend the use of the tax code ES43 for interest income received by a non-financial institution.

joseph

Posts : 277
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Re: Financial services

Post by joseph on Thu Jan 15, 2015 10:03 pm

The following tax codes apply:

  1. Interest income received locally:
    - by a financial institution -> ES
    - by a non-financial institution -> ES43
  2. Interest income received from overseas (international services) -> ZRE
  3. Interest expense payable -> EP

joseph

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Re: Financial services

Post by Edin on Mon Jan 19, 2015 6:23 pm

Thank you Josph, it is very nice explanation.
So filling up GST 03 form, part C, where shall we show this interest income, under exempt supply?

Edin

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Re: Financial services

Post by joseph on Mon Jan 19, 2015 6:26 pm

Correct and your GST compliant accounting software should be able to take care of that.

_________________


DISCLAIMER:
Any opinion expressed is strictly my personal view based on my understanding and interpretation of the GST Act 2014, Regulations, Orders, DG's Panel Decisions and Customs' Guides. You should seek advice from experts and/or the Customs Dept if the subject matter is significant to your business.

joseph

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Re: Financial services

Post by Edin on Mon Jan 19, 2015 6:32 pm

Well, I've talked to them already but they were not sure which tax code to use and where to put interest income in GST 03 form, so looks like I have to advise them. Thanks once more.

Edin

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Re: Financial services

Post by Edin on Fri Mar 20, 2015 10:07 am

Hi Joseph,

I have one more question / issue. How shall we invoice / which invoice to use (tax invoice for mix supply or just invoice or anything else) for charging / invoicing our subsidiary company for interest on loan given to them? This will be our incidental exempt supply. What is your view on this?

Thank you
Regards
Edin

Edin

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Re: Financial services

Post by Edin on Fri Mar 20, 2015 10:40 am

One more question regarding invoicing, which invoice to use (tax invoice, invoice, DN, etc) for charging my client interest for late payment? Interest charged on late payment is not subject to GST, since it is regarded as a penalty and penalty is considered as out of scope supply.

Edin

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Re: Financial services

Post by joseph on Fri Mar 20, 2015 11:18 am

Use a normal invoice.

_________________


DISCLAIMER:
Any opinion expressed is strictly my personal view based on my understanding and interpretation of the GST Act 2014, Regulations, Orders, DG's Panel Decisions and Customs' Guides. You should seek advice from experts and/or the Customs Dept if the subject matter is significant to your business.

joseph

Posts : 277
Join date : 2014-09-25

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Re: Financial services

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