M/s. Rajkot Nagarik Sahakari Bank Ltd

The applicant is multi-state Schedule Co-operative Bank providing various services under the category of Financial and Related Services to respective account holders. The applicants also providing service for operation of Demat account having three schemes namely Basic Service Demat Account Rajkot Nagarik Investor Scheme and Rajkot Nagarik Free Scheme .None of the scheme are comparable with each other and each scheme has its own merits and benefits. It is also an admitted fact that in Rajkot Nagarik Free Scheme account holder is getting some free services only because he is depositing some amount, interest free, as security and the applicant on his transactions in the Demat account.The applicant, while working under the erstwhile provisions of Service tax Act had dispute with the department on the amount received as Refundable interest free deposit and the free services provided to such account

The applicant has sought the advance ruling on following queries :
i) In the facts and circumstances of the case whether Refundable Interest Free Deposit received could be treated as Supply under the provisions of Goods and Services Tax Act, 2017? And chargeable to tax in the hands of the applicant?
ii) In the facts and circumstances of the case whether the amount of Rs. 2500/- being Refundable interest free deposit, which allows depositor same benefits, would attract GST?
iii) In the facts and circumstances of the case, whether first 10 free transactions subject to maximum of rupees 5 Lakh allowed to the Demat account holder depositing Refundable interest free deposit would attract GST?

To attract GST the transactions should be treated as supply as defined under the provisions of Section 7 of Goods and Service Tax Act, 2017 and one of the important criteria is that there should be consideration.
The definition of Consideration under Section 2(31) of CGST & GGST Act, 2017 reads as below:
“Consideration in relation to the supply of goods or services or both
Includes-
(a) Any payment made or to be made, whether in money or otherwise, in respect of, in response to, or for the inducement of, the supply of goods or services or both, whether by the recipient or by any other person but shall not include any subsidy given by the Central Government or a State Government
(b) The monetary value of any act or forbearance, in respect of, in response to, or for the inducement of, the supply of goods or services or both, whether by the recipient or by any other person but shall not include any subsidy given by the Central Government or a State Government;
Provided that a deposit given in respect of the supply of goods or services or both shall not be considered as payment made for such supply unless the supplier applies such deposit as consideration for the said supply;”

As can be seen, deposit is excluded from definition of the consideration by the provisio to Section 2(31) of CGST & GGST Act, 2017. However, the notional interest/monetary value of the act of providing refundable interest free deposit will be considered as consideration as the same is  covered in both the limbs of the definition of consideration. Further, it appears that the Refundable Interest Free Deposit are an additional commercial consideration to cover risk of the Demat account. It appears that the main purpose of the deposits is not only security but also collection of capital Therefore, the monetary value of the act of providing refundable interest free deposit is the consideration for the services provided by the RNSB and therefore the services provided by RNSB can be treat as supply and chargeable to tax in the hands of the applicant.

As per the proviso of section 2(31) CGST Act 2017 mentioned above , it appears that the amount of Rs. 2500/- will not attract the GST being the deposit Unless the supplier applies such deposit as consideration. However the monetary value of the act of providing this deposit of Rs.2500/- will attract GST.

The applicant admitted  that in Rajkot Nagarik Free Scheme account holder is getting some free services. The first 10 free transaction allowed to the demat account holders are in the nature of discount and will not attract GST subject to the fulfillment of the conditions prescribed under Section 15(3) of the CGST & GGST Act which is reproduced as below:

SECTION 15.
 Value of taxable supply. —
(1) -------
(2) --------
(3) The value of the supply shall not include any discount which is given —
    (a) before or at the time of the supply if such discount has been duly recorded in the invoice issued in respect of such supply; and
    (b) after the supply has been effected, if —
         (i) such discount is established in terms of an agreement entered into at or before the time of such supply and specifically linked to relevant invoices; and
        (ii) input tax credit as is attributable to the discount on the basis of document issued by the supplier has been reversed by the recipient of the supply.

Crux:
i The monetary value of the act of providing refundable interest free deposit is the consideration for the services provided by the RNSB and therefore the services provided by RNSB can be treated as supply and chargeable to tax in the hands of the applicant
ii: The amount of Rs. 2500/- will not attract the GST but the monetary value of the act of providing this deposit will attract GST.
iii: The first 10 free transaction allowed to the demat account holder are in the nature of discount and will not attract GST subject to the fulfillment of the conditions prescribed under Section 15(3) of the CGST & GGST Act 2017