Securitisation transactions must be exempt from GST, says FIDC

The Finance Industry Development Council (FIDC) has urged the GST Council to exempt securitisation transactions from the GST levy.

There is need for the GST Council to confirm the position about the non-applicability of GST on securitisation transactions, FIDC Chairman Raman Aggarwal told BusinessLine .

FIDC is a self regulatory body representing asset-financing non-banking finance companies (NBFCs).

Aggarwal pointed out that the erstwhile service tax law had explicitly excluded transaction in money (securitisation) from the purview of service tax. However, the new GST regime is silent on this aspect, he said. “We want the non-applicability of GST to be confirmed for securitisation transactions, just as it was exempted for service tax,” he said.

Absence of appropriate clarification from the Government may lead to unnecessary interpretation and litigation, according to Aggarwal.

FIDC has now written to the Working Group for GST (Banking, Financial and Insurance Sector) detailing the concerns of the NBFC sector on such transactions.

Aggarwal said securitisation is basically a money transaction and one of the modes of obtaining funds by the NBFC for its business purposes. Further securitisation transactions are clearly governed by the RBI regulations and duly monitored.

These transactions are simple money transactions, wherein a secured debt is assigned to a Trust/Bank. Thus, it is very similar to actionable claims, according to FIDC. While actionable claims is clearly excluded from the purview of GST, same position needs to be extended to securitisation transactions, the FIDC said.

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