Securitisation of debts, mortgage:
Often debts are securitized and transferred to another Financial Institution/Bank. Sometimes, this is done under ‘Securitisation and Reconstruction of Financial Assets and Enforcement of Security Interest Act, 2002’.
Technically, such debt is not unsecured debt and hence cannot fall within the definition of ‘actionable claim’.
The transaction is not ‘transfer of actionable claim’ (under Transfer of Property Act), but acquisition of ‘financial asset’ under ‘Securitisation and Reconstruction of Financial Assets and Enforcement of Security Interest Act, 2002’.
Departmental clarification that acquisition of secured debt is transaction in money – Sale, purchase,acquisition or assignment of a secured debt like a mortgage will constitute a transaction in money. However if a service fee or processing fee or any other charge is collected in the course of transfer or assignment of a debt then the same would be chargeable to service tax – Para 2.8.9 of CBE&C’s ‘Taxation of Services : An Education Guide’ published on 20-6-2012.
If it is transaction in money, it can come within the definition of ‘service’.
However, GST should be payable only on charges relating to transfer of secured debt and not on entire quantum of secured debt.
Further, security receipt issued under the Securitisation Act is included in definition of ‘security’. Hence, it is outside GST net.