**Title:** GST Rate & HSN Code for Financial Services – Chapter 99
**Introduction:**
Financial services are an integral part of any economy, providing essential services such as banking, insurance, and investment management. These services are governed by various regulations and laws, including the Goods and Services Tax (GST). In this blog, we will discuss the GST rates and HSN codes for financial services, specifically Chapter 99 under the GST tariff.
**HSN Codes for Financial Services – Chapter 99:**
HSN codes are a harmonized system of nomenclature used to classify goods and services for taxation purposes. Chapter 99 under the GST tariff covers all types of financial services, including banking, insurance, and investment management. The following table provides a detailed list of HSN codes and their descriptions for Chapter 99:
| HSN Code | Product Description |
|———-|———————|
| 99.01 | Banking and financial services, except for services covered under HSN codes 99.02 and 99.03 |
| 99.02 | Stock, share, and bond broking services |
| 99.03 | Securities and commodities broking services |
| 99.04 | Credit rating services |
| 99.05 | Financial leasing services |
| 99.06 | Foreign exchange services |
| 99.07 | Other financial services, including factoring, venture capital, and asset management services |
| 99.08 | Insurance and reinsurance services |
| 99.09 | Pension and retirement fund services |
| 99.10 | Other auxiliary financial services, including trusteeship, custodial, and security services |
**GST Rates on Financial Services – Chapter 99:**
The GST rates for financial services under Chapter 99 are as follows:
| HSN Code | Product Description | GST Rate |
|———-|———————|———-|
| 99.01 | Banking and financial services, except for services covered under HSN codes 99.02 and 99.03 | 18% |
| 99.02 | Stock, share, and bond broking services | 18% |
| 99.03 | Securities and commodities broking services | 18% |
| 99.04 | Credit rating services | 18% |
| 99.05 | Financial leasing services | 18% |
| 99.06 | Foreign exchange services | 18% |
| 99.07 | Other financial services, including factoring, venture capital, and asset management services | 18% |
| 99.08 | Insurance and reinsurance services | 18% |
| 99.09 | Pension and retirement fund services | 18% |
| 99.10 | Other auxiliary financial services, including trusteeship, custodial, and security services | 18% |
**Key Products Covered Under Chapter 99:**
Some of the key products covered under Chapter 99 include banking services, stock and bond broking services, credit rating services, financial leasing services, foreign exchange services, insurance and reinsurance services, and pension and retirement fund services. These services are essential for the functioning of the financial sector and contribute significantly to the economy.
**HSN Code Compliance for Chapter 99 Products:**
All businesses providing financial services covered under Chapter 99 must comply with the HSN codes and GST rates mentioned above. Failure to do so can result in penalties and legal repercussions. It is essential to accurately classify and report financial services to avoid any compliance issues.
**GST Rates Applicable to Financial Services:**
The following table provides a detailed list of GST rates and HSN codes applicable to various financial services under Chapter 99:
| HSN Code | Product Description | GST Rate |
|———-|———————|———-|
| 99.01 | Banking and financial services, except for services covered under HSN codes 99.02 and 99.03 | 18% |
| 99.02 | Stock, share, and bond broking services | 18% |
| 99.03 | Securities and commodities broking services | 18% |
| 99.04 | Credit rating services | 18% |
| 99.05 | Financial leasing services | 18% |
| 99.06 | Foreign exchange services | 18% |
| 99.07 | Other financial services, including factoring, venture capital, and asset management services | 18% |
| 99.08 | Insurance and reinsurance services | 18% |
| 99.09 | Pension and retirement fund services | 18% |
| 99.10 | Other auxiliary financial services, including trusteeship, custodial, and security services | 18% |
**GST Exemptions under Chapter 99:**
Some financial services are exempt from GST or fall under the 0% tax bracket. These include services provided by the Reserve Bank of India, National Bank for Agriculture and Rural Development, and Small Industries Development Bank of India. Certain pension and retirement fund services and services provided by the National Pension System Trust are also exempt from GST.
**HSN Code Format for Chapter 99:**
The HSN code structure for Chapter 99 is as follows:
– 2-digit code for Chapter 99: Financial Services
– 4-digit code for HSN codes under Chapter 99
– 6-digit code for sub-services under HSN codes
– 8-digit code for further classification of services
**Input Tax Credit (ITC) for Chapter 99 Products:**
ITC is allowed on raw materials and packaging related to financial services, as they are essential for the provision of these services. However, ITC is not allowed on certain services such as banking and financial services, stock and bond broking services, and credit rating services.
**Common Mistakes in Classification and How to Avoid Them:**
Some common mistakes in the classification of financial services include using the wrong HSN code or confusing the GST rate for a particular service. To avoid these errors, businesses must consult a tax expert or refer to the GST rates and HSN codes provided by the government. Accurate classification is crucial for compliance and can save businesses from penalties and legal consequences.
**HSN Code Usage for Small vs Large Businesses:**
Small businesses with a turnover of less than Rs. 1.5 crores can use the 4-digit HSN code for financial services. However, businesses with a higher turnover must use the 6 or 8-digit HSN code for accurate classification and reporting.
**Tips for Traders, Exporters, and Importers:**
Traders, exporters, and importers must accurately classify financial services under the appropriate HSN code to avoid any compliance issues. It is also essential to keep track of any changes in GST rates or HSN codes to ensure accurate reporting and payment of taxes.
**Conclusion:**
In conclusion, Chapter 99 under the GST tariff covers a wide range of financial services, including banking, insurance, and investment management. Accurate classification and compliance with the GST rates and HSN codes are essential for businesses providing these services. It is also crucial for traders, exporters, and importers to be aware of the correct HSN codes for financial services to avoid any compliance issues.
**FAQs:**
Q: What is the GST rate for banking services under Chapter 99?
A: The GST rate for banking services is 18% under HSN code 99.01.
Q: Are credit rating services taxable under GST?
A: Yes, credit rating services are taxable under GST at a rate of 18% under HSN code 99.04.
Q: Can small businesses use the 4-digit HSN code for financial services?
A: Yes, small businesses with a turnover of less than Rs. 1.5 crores can use the 4-digit HSN code for financial services.
Q: Is ITC allowed on raw materials and packaging for financial services?
A: Yes, ITC is allowed on raw materials and packaging related to financial services, except for certain services such as banking and financial services, stock and bond broking services, and credit rating services.
