Chit fund body seeks Bhatti’s support for exemption of GST

Hyderabad: The Telangana Federation of Chit Funds has urged Finance Minister Mallu Bhatti Vikramarka to support them in getting an exemption for chit fund services from the levy of GST.

The Federation president K Srinivas Reddy and Secretary General L Suman said that chit funds mobilise savings from lower and middle-income groups and provide the pooled amount to a needy person in that group. As such, the financial services provided by chit funds were similar to those provided by banks and finance companies. They added that the chit fund industry is the only financial institution apart from banks that mobilises small savings and helps in promoting financial inclusion and inclusive growth.

The Federation president said that the GST implications on the chit fund industry meant that they were charging their subscribers GST at 18 per cent on the foreman commission and other incomes, whereas there was no GST implication on the interest charged by banks. The Chit Fund industry also serves as an alternate financial avenue for lakhs of people, and GST on the foreman commission, which was their primary source of income, was a burden for the subscribers.

“Exemption of GST for us will help in a long way to succeed in our efforts to bring in more people into our fold and thereby play a prominent part in helping the subscribers achieve financial independence and realise their aspirations,” said Srinivas Reddy. He added that a representation had also been submitted to Union Finance Minister Nirmala Sitharaman. Srinivas Reddy said that the levy of GST on chit fund services would affect the return on savings of the chit subscribers.

If the return on savings is diminished, savers will not be attracted to chit funds. He noted that this would deprive unbanked and underbanked people of a facility to avail of loans at competitive rates, forcing them to borrow money at annual interest rates ranging from 35 per cent to 60 per cent or even more.