Chit Fund Association Asks Bhatti To Support GST Exemption

Hyderabad, Sept 3 (Maxim News): 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.

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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% 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.

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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. (Maxim News)

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