Treatment of Priority Sector Lending Certificate under GST

Priority Sector Lending Certificate under GST have been subjected to Reverse Charge Mechanism, but first let’s understand what is the concept of PSLC.

What is Priority Sector Lending Certificate?

As per the RBI guidelines, banks have to lend the certain percentage of their total loans to Priority Sectors such as Agriculture, Education, Micro Credits etc. So one can say that banks have certain priority sector lending targets to be achieved. Many banks are unable to achieve such targets while some banks are able to issue the loans above the required target limit.

So those banks who have exceeded their priority sector lending targets can issue Priority Sector Lending Certificate to the extent of the amount of loan issued over and above the target limit. These certificates once issued by banks can be purchased by other banks who have not been able to achieve their target limits. Such PSLC are traded on RBI e-Kuber platform.

Although there are certain limitations and sub-targets with respect to certain sectors while issuing PSLCs and there are other several restrictions and guidelines which have to be followed.

Treatment of Priority Sector Lending Certificate under GST

Ministry of Finance vide Notification No. 11/2018-Central Tax (Rate) notified that Priority Sector Lending Certificate will be leviable to GST under Reverse Charge Mechanism by adding the 7th entry in the list of goods which are chargeable under Reverse Charge Mechanism as per section 9(3), as notified by Notification No.4/2017-Central Tax (Rate).

So, now if Priority Sector Lending Certificate(PSLC) is being supplied by any registered person to the other registered person, then GST shall be paid by the recipient.

The said notification can be read as below: