Quick wins for a faster PC:
Repair Windows errors before they cause bigger problemsFix Now →Fix the driver behind crashes, sound loss and screen glitchesFind Drivers →Clear out junk files and repair common Windows errorsFree Scan →For an ordinary taxable service supplied by a non-individual NBFC to a bank or another NBFC, the supplier generally pays GST under forward charge. A specific exception applies when an individual Direct Selling Agent (DSA) supplies a covered service to a bank or NBFC: the recipient pays GST under reverse charge. The answer depends on the supplier’s legal form, the service, and the applicable notification—not simply on the fact that the recipient is a bank.
Who pays GST when an NBFC provides a service to a bank?
For the ordinary case described in the GST Council’s agenda note, services supplied by non-individual NBFCs—including companies and partnership firms—to banks or NBFCs remain under forward charge. The supplier accounts for output GST, subject to the service’s taxability, any applicable exemption, and its classification. The Council note states: “However, services by non-individual NBFCs (corporate, partnership firms) to banks/NBFCs would continue under forward charge, as at present.” GST Council, Detailed Agenda Note, 28th meeting.
There is a notified reverse-charge exception for services supplied by an individual DSA to a bank or NBFC. For a service that falls within that entry, the receiving bank or NBFC pays the GST. The GST Council’s record of Notification 15/2018-Central Tax (Rate) describes it as amending Notification 13/2017-Central Tax (Rate) to specify services supplied by individual DSAs to banks/NBFCs for reverse charge. GST Council, Notification 15/2018-Central Tax (Rate).
How to determine the treatment for a particular transaction
- Identify the actual supplier. Establish whether the service provider is an NBFC entity or other non-individual, or an individual DSA. Do not assume that every person described commercially as an agent has the same legal status.
- Describe the service precisely. Match the substance of what was supplied—not just a label such as “NBFC service”—against the relevant notification entry.
- Check whether the reverse-charge entry applies. The notified individual-DSA service to a bank or NBFC is the specific exception discussed above. A bank’s status as recipient alone does not make every supply to it subject to reverse charge; recipient liability applies to notified categories under section 9(3) of the CGST Act.
- Check exemption and rate classification separately. Notification 12/2017-Central Tax (Rate) concerns service exemptions, while Notification 13/2017-Central Tax (Rate), as amended, lists reverse-charge categories. Consult the current text and amendments using the CBIC Central Tax (Rate) notifications index. The service description and applicable rate classification must be established; there is no single GST rate for all services an NBFC may provide to a bank.
- Confirm the tax framework for the transaction. The distinction above addresses domestic supplies under the relevant central and state tax or IGST framework. Inter-State status, place of supply, and cross-border facts may affect which provisions apply.
Why an individual DSA is treated differently
The GST Council agenda note describes DSAs as sales agents engaged by financial institutions, compensated on a performance-linked basis, and supplying services to banks or NBFCs. It records the policy rationale for placing tax payment on the bank or NBFC for services of individual DSAs while retaining forward charge for non-individual suppliers. That explanation provides context; the operative notification wording governs a particular transaction.
Free tools Windows power users keep installed
One-click scans. No signup required.
#1 Best Overall
Does the bank’s involvement make the service exempt?
No blanket exemption for all services supplied by NBFCs to banks is established by these provisions. Nor does the recipient’s identity alone decide who pays. Check the specific service against the exemption notification and, separately, determine whether a reverse-charge entry covers the supplier-recipient-service combination. CBIC lists Notification 12/2017-Central Tax (Rate) as the service-exemption notification and Notification 13/2017-Central Tax (Rate) as the reverse-charge notification on its notification index.
Independent reader supportYour contribution helps us test, update, and keep practical guides available for everyone.What to verify before accounting for GST
- The supplier’s legal constitution and, where relevant, whether the supplier is an individual DSA.
- The precise contractual and actual service supplied, and whether it matches a notified reverse-charge or exemption entry.
- The current notification text and amendments applicable on the transaction date.
- The service’s tax classification and rate; no universal rate follows merely from the label “NBFC service.”
- The place-of-supply and inter-State or cross-border facts that determine the applicable tax framework.
CBIC’s Goods & Service Tax: Sectoral FAQs discuss bank/NBFC invoicing, but invoicing mechanics do not by themselves determine whether the underlying service is taxable or whether forward charge or reverse charge applies.
Quick Recap
Rank #4
Product prices and availability are accurate as of the date/time indicated and are subject to change. Any price and availability information displayed on Amazon at the time of purchase will apply.
