A business facilitator (BF) or business correspondent (BC), under the Goods and Services Tax (GST) Act 2017, is an intermediary appointed by a bank or insurance company to conduct specific activities on their behalf, primarily focusing on reaching out to customers in remote areas or underserved segments.

Here’s a breakdown of their key aspects:

Appointment:

• Appointed by a bank or insurance company under guidelines issued by the Reserve Bank of India (RBI).
• Act as an extension of the bank/insurance company in specific areas GST Act 2017.

Activities:

• May include opening bank accounts, accepting deposits and withdrawals, providing micro-insurance, and performing other basic financial services.
• Not authorized to directly charge customers for their services.
• Earn commissions/fees from the bank/insurance company for the services they perform GST Act 2017.

GST Implications:

• Banking: Banking services provided by BFs/BCs are considered services provided by the bank itself. Therefore, the bank is liable to pay GST Act 2017 on the entire value of service charges, regardless of whether it’s collected by the bank or the BF/BC.
• Insurance: Services provided by BFs/BCs for insurance companies may be subject to GST Act 2017 depending on the specific nature of the services.

EXAMPLE

• Types of BC/BFs:Are you interested in individual agents, NGOs, kirana stores, or other types of entities acting as intermediaries?
• Banks they partner with:GST Act 2017 Knowing the state helps narrow down the major banks operating there and likely to have BC/BF partnerships.
• Services offered:Different BC/BFs offer varying services like account opening, cash deposits/withdrawals, loan applications, etc. Specifying the state lets me focus on relevant services.
• Specific examples:I can share actual names and brief descriptions of successful BC/BFs operating in your chosen state GST Act 2017.

FAQ QUESTION

1.What is a BF/BC?

A BF/BC is an intermediary appointed by a banking company or an insurance company under the guidelines issued by the Reserve Bank of India (RBI) under GST Act 2017. They act as a link between the company and its customers in remote or underserved areas, providing basic financial services like account opening, cash deposits and withdrawals, remittance, etc.

2. Are BF/BCs liable to register under GST Act 2017?

It depends.

• If the BF/BC receives commission or any other remuneration directly from the customers,they must register under  GST Act 2017 if their annual turnover exceeds ₹20 lakhs.
• However, if the BF/BC receives commission or remuneration only from the banking or insurance company,they are not required to register under GST, regardless of their turnover. This is because the banking or insurance company is considered the supplier of the services provided by the BF/BC.

3. Who is liable for GST on services provided by a BF/BC?

The banking or insurance company is the supplier of the services provided by the BF/BC and is therefore liable to pay GST Act 2017 on the entire value of service charge or fee charged to customers, whether or not received via the BF/BC.

4. Are there any exemptions for services provided by BF/BCs?

Yes. Services provided by BF/BCs in relation to accounts in rural areas are exempt from  GST Act 2017 under Schedule 11 of the CGST Act, 2017. This includes accounts opened in villages with a population of less than 10,000 or in notified tribal areas.

CASE LAWS

There aren’t many reported case laws specifically dealing with Business Facilitators (BFs) and Business Correspondents (BCs) under the GST Act, 2017. This is because the concept of BFs and BCs itself is relatively new and the complexities of the GST Act 2017 haven’t fully manifested in litigation yet.

However, there are several resources that might be helpful in understanding the legal aspects of BFs and BCs under GST:

Notifications and Circulars:

• Notification No. 12/2017-Central Tax (Rate):This notification defines “business facilitator or business correspondent” and lists services provided by them to banks and insurance companies under the GST Act 2017.
• Circular No. 57.2019-PDF of Tamil Nadu Commercial Tax department:This circular clarifies the exemption from GST on services provided by BFs/BCs to banking companies in rural areas.
• Index To RBI Circulars – Reserve Bank of India:This website provides access to various circulars issued by the RBI regarding BFs and BCs, including guidelines on their activities and responsibilities.

Relevant provisions of the GST Act 2017:

• Section 2(11):This section defines “supply of services” which would be relevant for determining whether the activities of BFs/BCs fall under the purview of GST Act 2017.
• Section 12:This section deals with exemption from GST Act 2017 on certain services, including some services provided by BFs/BCs in rural areas.

Other resources:

• Articles and commentaries by tax experts:Several articles and commentaries discuss the GST Act 2017 implications of BFs and BCs. You can find these on the websites of tax professionals and legal publications.
• Websites of government agencies:The websites of the Goods and Services Tax Network (GSTN) and the Central Board of Indirect Taxes and Customs (CBIC) might have relevant information on BFs and BCs.

SERVICES PROVIDED TO GOVERNMENT:

The Goods and Services Tax (GST) Act, 2017, treats the government as both a supplier and a recipient of services. However, the taxability of services provided to the government depends on various factors outlined in the Act. Here’s a breakdown:

Taxable Services:

• Services supplied by a registered supplier to the government:In general, any service provided by a registered supplier to the government is taxable under the reverse charge mechanism (RCM). This means the liability to pay  GST Act 2017  lies with the government entity receiving the service, not the supplier. Exceptions include specific services like renting immovable property, certain postal services, and services related to aircraft or vessels inside airports or ports.
• Continuous supply of services exceeding ₹5,000:Even if the service itself is exempt from GST Act 2017, if the government receives a continuous supply of that service exceeding ₹5,000 in a financial year, the exemption ceases to apply.

Exempt Services:

• Certain services by government departments:Services provided by government departments to each other or to the public for a fee are generally exempt from GST Act 2017. This includes services like public transportation, education, healthcare, sanitation, water supply, etc.
• Specific services notified by the government:The government can notify specific services provided to it as exempt from GST Act 2017  through notifications issued under the Act.

Reverse Charge Mechanism (RCM):

As mentioned earlier, RCM applies to most services provided to the government by registered suppliers. The government entity acts as the tax collector and is responsible for paying GST Act 2017  on the taxable value of the service. This helps simplify compliance and ensures timely tax collection.

EXAMPLE

• Which state are you interested in?Different states have different needs and priorities, so the types of services will vary.
• What kind of services are you curious about?Are you interested in IT services, infrastructure development, healthcare solutions, environmental initiatives, or something else?

Once I have this information, I can provide some relevant and specific examples of how companies or individuals are working with the government in that state.

For example, if you were interested in healthcare services in Tamil Nadu, I could mention companies that are providing telemedicine solutions to rural areas or startups developing innovative medical devices. Or, if you were interested in IT services in Maharashtra, I could talk about companies that are helping the state government move towards e-governance or develop smart city initiatives.

FAQ QUESTIONS

1. Are all services provided to the government exempt from GST Act 2017?

No, not all services provided to the government are exempt from GST Act 2017. In fact, the majority of services are taxable, with some specific exceptions listed in the Act.

2. Which services are exempt from GST Act 2017 when provided to the government?

Here are some major categories of services exempt from GST Act 2017 when provided to the government:

• Services by the Department of Posts:This includes services like speed post, express parcel post, life insurance, and agency services for the government itself.
• Services related to aircraft or vessels:Services like handling of cargo, ground transportation within airport/port premises, and supply of fuel to aircraft/vessels are exempt.
• Certain transport services: GST Act 2017 Public transport provided by railways (except first class and AC coaches), metro, monorail, inland waterways, non-tourist public transport by water, and metered taxis/auto rickshaws are exempt.
• Renting of immovable property:Rent paid by the government for immovable property is exempt.

3. Who pays the GST for taxable services provided to the government?

This depends on the type of service and the government entity involved. In most cases, the tax liability falls on the supplier of the service under the reverse charge mechanism. This means the supplier has to pay the GST themselves, instead of collecting it from the government.

4. Are there any special provisions for services with continuous supply to the government?

Yes, for continuous supply of services (like security, maintenance, etc.)GST Act 2017 where the annual consideration does not exceed ₹5,000, the exemption applies even if the service is taxable.

CASE LAWS

The applicability of GST on services provided to the government under the GST Act, 2017 is a complex issue with various nuances depending on the specific service and its nature. Determining the taxability also involves analyzing relevant case laws for precedents and clarifications.

Here’s an overview of the key points:

General Rule: Services provided to the government by suppliers registered under GST Act 2017 are generally exempt from paying GST, as per Section 17(5)(b) of the CGST Act. However, several exceptions exist.

Exceptions:

• Services specifically taxable:Certain services provided to the government are explicitly taxable under the  GST Act 2017, as listed in Notification No. 12/2017-CGST (Rate). Examples include:
  • Legal consulting and drafting services
  • Public relations services
  • Management consulting and business administration services
  • Audit services
  • Maintenance and repair services
  • Security services
• Reverse Charge Mechanism (RCM):In some cases, the liability to pay  GST Act, 2017  falls on the government recipient under the RCM, as per Section 9(4) of the CGST Act. This applies to specific services like advertising, construction, and manpower supply.

Case Laws:

Several case laws have been adjudicated over the years, further clarifying the application of GST Act, 2017  on services provided to the government. Here are some notable examples:

• M/s. Hindustan Powerprojects Ltd. vs. Union of India & Ors. (2019):The Gujarat High Court ruled that services rendered by private entities for construction of government hospitals are exempt from GST.
• M/s. Vapi Greenbelt Infrastructure Ltd. vs. Union of India & Ors. (2019):The Bombay High Court held that transportation services provided to the government by a contractor for construction activities are exempt from GST Act, 2017.
• Commissioner of GST & Central Excise, West Bengal vs. M/s. Indian Oil Corporation Ltd. (2020):The Calcutta High Court clarified that pipeline transportation of crude oil for the government’s strategic reserve falls under the RCM provisions.