GST on Priority Sector Lending Certificates (PSLCs): Key Highlights of Circular No. 62/36/2018-GST
<h4><strong>Introduction</strong></h4><p>The <strong>Ministry of Finance</strong> issued <strong>Circular No. 62/36/2018-GST</strong> on <strong>September 12, 2018</strong>, to clarify the <strong>GST applicability on trading of Priority Sector Lending Certificates (PSLCs)</strong>. The circular addresses concerns regarding the <strong>mechanism for discharging GST liability</strong> and the <strong>applicable tax rate on PSLC transactions</strong>.</p><hr><h3><strong>Key Highlights</strong></h3><h4><strong>1. Background: What are PSLCs?</strong></h4><ul><li><strong>Priority Sector Lending Certificates (PSLCs)</strong> are financial instruments that allow banks to meet their <strong>priority sector lending (PSL) targets</strong> without directly giving loans.</li><li>Banks <strong>buy and sell PSLCs</strong> to comply with <strong>RBI’s PSL requirements</strong>, enabling those with excess lending to transfer their credit to banks that need it.</li></ul><h4><strong>2. GST Applicability on PSLC Trading</strong></h4><ul><li><strong>Timeframe:</strong> GST on PSLC transactions from <strong>July 1, 2017, to May 27, 2018</strong> will be applicable.</li><li><strong>Tax Payment Mechanism:</strong><ul><li>The <strong>seller bank</strong> (bank selling the PSLC) is responsible for paying <strong>GST on a forward charge basis</strong>.</li></ul></li><li><strong>GST Rate:</strong> <strong>12% GST</strong> applies to <strong>PSLC trading</strong>.</li></ul><h4><strong>3. Implementation and Compliance</strong></h4><ul><li>The circular mandates that banks <strong>calculate and pay GST on past transactions</strong> within the <strong>specified period</strong>.</li><li>Any <strong>difficulties in implementation</strong> should be reported to the <strong>Central Board of Indirect Taxes and Customs (CBIC).</strong><a href="https://cms.plasament.com/storage/nisha/circular-no-62of-2018-on-pslc.pdf">circular_no_62of_2018_on_pslc</a><br> </li></ul>