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Grant assistance for various interventions under FIF-Applicability of GST and treatment of Input Tax Credit (ITC) while settling the claims
Ref. No. NB.DFIBT/       877     -    2355        /DFIBT-23/2018-19 25 April 2018
Circular No.   87             / DFIBT –  11         / 2018
 
The Chairman and Managing Director / Chairman / Chief Executive Officer
Scheduled Commercial Banks including scheduled Small Finance Banks
Regional Rural Banks
 
State Co-operative Banks and 
District Central Co-operative Banks
 
Dear Sir
 
Grant assistance for various interventions under FIF- Applicability of GST and treatment of Input Tax Credit(ITC) while settling the claims
 
 
As you are aware NABARD is providing grants under various schemes of Financial Inclusion fund (FIF) to banks. These grants are provided from FIF with reference to the actual cost of goods and services incurred by the banks.   With the introduction of Goods and Services Tax (GST) from 01 July 2017, there might be instances of receipt of Input Tax Credit (ITC) by the banks against the GST paid for such goods and services. The receipt of the ITC effectively reduces the cost of goods and services incurred by the banks to that extent. In this context some instances have come to our notice where the grant amount reimbursed to banks under FIF was higher than the eligible amount due to the effect of ITC.
 
2. Therefore, to rectify the above situation arising out of the GST and ITC, it has been decided to review the grants reimbursed to all the banks from 01 July 2017 to ensure that only eligible grant amount is reimbursed after taking into account the receipt of ITC, if any, by the banks. It is therefore necessary for the banks to revisit the grants received by them from 01 July 2017 onwards.  After the review, excess grant, if any received under FIF, needs to be returned to NABARD.
 
3. We therefore advise that with effect from 01 July 2017 (date of applicability of GST), for the purpose of settlement of grant support under FIF, the total cost of the goods and services shall be calculated after deducting the ITC, if any; and claims will be settled as per the terms and conditions of the FIF schemes. 
4. In this regard it is envisaged that there could be two scenarios viz. claims already settled by NABARD during 01 July 2017 to 30 April 2018 and secondly for claims to be lodged with NABARD after 01 May 2018. The procedures to be followed in respect of these two scenarios are detailed below: 
a) Furnishing details of GST and ITC in respect of claims already submitted/ settled by NABARD between 01 July 2017 and 30 April 2018: 
 
The claims already settled from 01 July 2017 to 30 April 2018 will be reviewed separately by NABARD for ascertaining the amount of excess grant assistance released to banks. In this regard, banks are advised to submit the details of GST and ITC in the format given in Annexure I under completed as well as ongoing projects. While carrying out this exercise there can be two scenarios, as indicated below, requiring separate treatments.
 
i. Scenario 1: The project has been completed and final instalment/s has/have been released during the said period. 
In these cases, the excess grant assistance released will be recovered from the agency. Banks may furnish project-wise information regarding claims settled/ releases made by NABARD, in Annexure I, and return the certified/ duly signed Annexure I to concerned NABARD Regional Office/ Head Office from where the grant support was availed. Based on the information received, NABARD Regional Office (RO)/ Head Office (HO) will calculate the amount to be refunded by the bank and raise demand for the exact amount. Banks may arrange to refund the said amount after receiving the refund demand letter from NABARD. 
 
ii. Scenario 2: The project is on-going and some instalments have been released during said period while balance amount is yet to be released.
 
In these cases, the excess grant assistance released, if any, will be adjusted against future claims under the particular ongoing proposal. Banks are required to furnish project-wise information regarding claims settled/ releases made, in Annexure I, and return the same duly certified/ signed to concerned NABARD Regional Office (RO)/ Head Office (HO) from where the grant support was availed, latest by 15 May 2018. Based on the information received, NABARD RO/ HO will assess the amount of excess grant to be adjusted in the subsequent claim made by the bank. In other words, the subsequent claim from the bank which will be accompanied with Annexure II (as detailed in para (b) below) will be settled after reckoning the amount of excess grant assistance ascertained in Annexure I. 
 
 b) Furnishing details of GST and ITC in respect of fresh claim to be lodged with NABARD after 01st May 2018:  
As regards fresh claims to be lodged with NABARD, after 01st May 2018, Banks are advised to submit the details of GST and ITC in the format given in Annexure II along with each claim under new as well as ongoing projects (where some balance amount is yet to be claimed). 
 
5. Banks are requested to follow the above instructions while lodging the fresh claim for release of grant assistance under FIF.   
  
Yours faithfully
(R. Srinivasan)
Chief General Manager
Encl.: As above