The Finance Industry Development Council (FIDC) has urged the government to allow NBFCs to avail 100 per cent input tax credit on lease transactions in the upcoming Goods and Services Tax (GST) regime.
In its submission to the Working Group for GST (banking, financial and insurance sector), the FIDC said there is a “crying need to promote leasing of movable assets, especially for the development of MSMEs (including start-ups) and farm sector”.
“For this, 100 per cent input tax credit should be available to the company (NBFCs ) on the tax paid on purchase of goods given on lease/hire purchase,” FIDC said in a letter.
The emphasis of the Working Groups should be on procedural simplification and possible rate structure, the government had said. The Working Groups have been asked to submit their reports by April 10.
FIDC is the self regulatory organisation-cum-representative body of NBFCs.
Speaking to BusinessLine , Raman Aggarwal, Chairman, FIDC, said NBFCs — going by the proposed GST framework — would be deprived of 100 per cent input tax credit that they are currently availing under the VAT regime.
“We need to promote leasing and therefore, 100 per cent input tax credit should be allowed for NBFCs on goods leased out by them,”Aggarwal said.
He pointed out that under the proposed GST regime, both financial and operating leases are to be considered as “supply of service” and that 50 per cent input tax credit is proposed to be allowed under the CGST law.
FIDC said leasing as an activity has been “suffering in India” due to imprudent taxation policies, primarily on account of dual/multiple taxation.