11 October 2020
Dear Sir(s) We understand that Stamp paper- judicial / non juidicial - are exempt from GST. Banks when purchase these stamp paper from government vendors, do not pay GST. When bank use this stamp paper for issuance of Bank guarantee for their customer they only recover the cost of stamp duty. Auditors are now stating that though stamp paper is exempt from GST, when these stamp paper is used at the time of issuance of Bank Guarantee, it is their input for providing service (Banking being subject to GST), Bank should recover the charges on their input as well and recover GST on entire amount. For e.g If stamp paper of Rs.200 is used and bank is charging Rs.5000 as commission, banks at present is recovering from customer 5200 and also recovering GST of Rs.900/-. Auditors are now asking to recover Rs/5200 plus 936/ Please advice the correct position
11 October 2020
I tend to agree that the GST is chargeable on the total consideration received by bank from its customer i.e. on 5200/- because what is exempted is sale of stamp paper as such. When this stamp paper is used for making bank guarantee then it is the input used in providing service of bank guarantee and will get covered in the value of supply under section 15.It is not the sale of stamp paper. It is also not the case of reimbursement of cost of stamp paper as pure agent under rule 33 because there is no such agreement between the bank and the customer whereby customers asks the bank to procure the stamp paper on his behalf.The stamp paper is procured by bank in its own name.So the charging GST on the entire value of Rs.5200 appears to be correct in law.
CAclubindia
