Would income from Commercial Paper (CP) or Certificates of Deposit (CD) be taxable under GST?
Commercial Paper (‘CP’) and Certificate of Deposit (‘CD’) are unsecured money market instruments which are issued in the form of a promissory note or in a dematerialized form through any of the depositories approved by and registered with SEBI. CPs are normally issued by highly rated companies, primary dealers and financial institutions at a discount to the face value. CDs
can be issued by Scheduled Commercial Banks (excluding Regional Rural Banks and Local Area Banks) and All – India Financial Institutions (FIs) permitted by RBI.
Since these are instruments for lending or borrowing money wherein consideration is represented by way of a discount or subscription to CPs or CDs, the same would be covered by the entry relating to ‘services by way of extending deposits, loans or advances in so far as consideration is represented
by way of interest or discount’ and is not liable to GST [serial no. 27 of the table of notification No. 12/2017-Central Tax (Rate) dated 28th June, 2017, as amended].
Further, promissory note is included in the definition of ‘money’ as given in clause (75) of Section 2 of the CGST Act, 2017 and hence not liable to GST.
However, if some service charges or service fees or documentation fees or broking charges or such like fees or charges are charged, the same would be a consideration for supply of services and chargeable to GST.