Managing taxes such as GST (Goods and Services Tax) is a critical part of operating a compliant and scalable lending platform. Whether you’re offering personal loans, business loans, or deposit products like savings or fixed deposits, having the ability to configure tax rules especially GST is essential for accurate accounting and regulatory adherence.
In this blog, we’ll explore how GST can be configured within a lending platform through tax components, tax groups, and charge-level mapping. We’ll also touch on best practices for applying GST on interest or fees and automating tax collection during repayments or interest postings.
Why GST Configuration Matters in Lending
GST is a consumption-based tax that is levied on various financial charges and services. In lending, this typically applies to:
- Processing fees
- Foreclosure charges
- Penal charges
- Interest on deposits (for tax withheld scenarios)
By configuring GST at the system level, you ensure that your tax calculations are accurate, traceable, and seamlessly integrated with your accounting and reporting modules.
Steps in GST Configuration Setup
Lending systems often provide a three-step process to manage GST efficiently:
1. Manage Tax Components
This is the foundation where you define individual GST rates and their applicability.
Key fields to configure:
- Name: The name of the tax (e.g., CGST 9%, SGST 9%).
- Percentage: The tax rate as a percentage (e.g., 9.0).
- Credit Account Type: Relevant if the accounting module is active (e.g., Tax Liability).
- Credit Account: This links to your general ledger account for tracking tax revenue.
- Start Date: Effective date from which this tax component should be applied.
Once created, these components act as building blocks that can be reused across multiple products and tax groups.
2. Manage Tax Groups
A tax group allows you to combine multiple tax components into one logical entity. This is useful for bundled GST configurations—for example, grouping CGST and SGST to apply a total of 18%.
To create a tax group:
- Give the group a descriptive name (e.g., GST 18% – Processing Fees).
- Add the desired tax components (e.g., CGST 9%, SGST 9%).
- Define applicable start dates for each.
Submit to finalize the group.
3. Tax Configuration Setup
This is where you apply the tax group to specific loan charges or products.
Where it applies:
- At the charge level: You can map a tax group to specific charges like processing fees, documentation fees, or penalties. This ensures GST is auto-applied during disbursement or repayment.
- At the product level: In deposit products like savings accounts, recurring deposits, or fixed deposits, you can configure tax withholding on posted interest.
For deposit products:
- Enable the “Is Withholding Tax Applicable” option.
- Choose the appropriate tax group from the dropdown.
Tax is collected automatically during the interest posting process.
Mapping GST to Charges
Refer to the embedded Excel sheet for a full breakdown of how GST is applied to a processing fee at the time of loan disbursement.
Scenario:
- Loan Amount: ₹100,000
- Processing Fee: ₹2,000
- GST Applied: 18% (₹360)
- Installment: ₹4,700 monthly
- Tenure: 24 months
- Interest: 12% per annum (calculated daily)
At disbursement, the system automatically calculates and applies:
- Processing Fee: ₹2,000
- GST: ₹360
- Total Payable on Disbursement: ₹2,360
This is visible in the repayment schedule and the transaction ledger where:
- The fee and tax are split into separate columns.
- A repayment of ₹2,360 is recorded on the same day as disbursement.
- GST is accounted as a distinct component for reporting and ledger posting.
Summary
GST configuration is not just a regulatory requirement it’s a pillar of operational integrity for digital lenders. By setting up tax components, grouping them logically, and mapping them to charges or interest rules, lenders can ensure every rupee is accounted for. This helps build trust, improve compliance, and automate one more layer of the lending lifecycle.
Modern lending platforms like CloudBankin provide intuitive interfaces to manage this process with zero coding. Whether it’s a one-time fee or recurring interest income, GST is calculated and posted automatically giving your finance and audit teams complete visibility.
- Email: salesteam@cloudbankin.com
- Sales Enquiries: +91 9080996606
- HR Enquiries: +91 9080996576
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But What can a Lender see in your SMS after you consent to them?
Lender can see income, expenses, and any other Fixed Obligation like (EMIs/Credit Card).
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It also tells the Lender the adverse incidents like
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A massive chunk of data is available in our SMS (more than 700 data points), which helps Lender to make a credit decision.
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