Contents
- Introduction: Interest Subvention Invoice from Bajaj Finance
- Overview of Key Compliance Points for FY 2025-26
- Understanding the Interest Subvention Mechanism
- GST Treatment on Subvention Invoice
- TDS Obligations of the Brand on Subvention Payment
- Accounting Treatment in Brand's Books
- Impacted Categories – Who Is Affected?
- Timeline of Key Events and Regulatory Changes
- You may also like
- Frequently Asked Questions (FAQs)
- Conclusion
Introduction: Interest Subvention Invoice from Bajaj Finance – What Brands Must Know
If your brand partners with Bajaj Finance for a 0% EMI or reduced-interest EMI scheme, you will periodically receive a tax invoice from Bajaj Finance for "Interest Subvention" or "Interest Subsidy" under SAC code 997119. This invoice raises several critical compliance questions: Is GST properly charged? Can the brand claim ITC? What TDS must the brand deduct before remitting payment? And how should this be booked in the accounts?
An Interest Subvention invoice from Bajaj Finance is not just a payment request — it is a taxable supply of financial services at 18% GST and triggers specific TDS obligations under Income Tax Act for the brand making the payment.
This guide covers the complete compliance framework for brands from a GST, TDS, and accounting perspective for FY 2025-26, incorporating the latest clarifications, advance rulings, and CBIC circulars relevant to subvention arrangements between brands/manufacturers and NBFCs like Bajaj Finance.
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Always verify that the invoice from Bajaj Finance mentions SAC code 997119, GST @ 18%, and Bajaj Finance's GST registration number before processing payment and claiming ITC. A missing or incorrect SAC can lead to ITC reversal during audits.
Overview of Key Compliance Points for FY 2025-26
The tax treatment of interest subvention paid by brands to NBFCs like Bajaj Finance has evolved significantly through judicial pronouncements, advance rulings, and CBIC clarifications. Here is a snapshot of the most critical compliance positions applicable in FY 2025-26:
Note: Bajaj Finance Limited is a Non-Banking Financial Company (NBFC) registered under the Companies Act and regulated by RBI. It is not a scheduled bank, which has significant implications for both GST exemption and TDS thresholds.
Important: Failure to deduct TDS on subvention payments to Bajaj Finance (an NBFC) can result in 30% disallowance of the entire subvention expenditure under Section 40(a)(ia) of the Income Tax Act, plus interest and penalty under Sections 201 and 271C.
| Compliance Aspect | Treatment / Position | Applicable Section / Law | Remarks for Brand |
|---|---|---|---|
| GST on Invoice | Taxable @ 18% | SAC 997119, Notification 11/2017-CT(R) | Do not treat as exempt interest income |
| ITC Claim | Eligible (if used for business) | Section 16 CGST Act | Ensure GSTR-2B reconciliation |
| TDS – Income Tax | Deductible @ 10% | Section 194A / 194J ITA 1961 | Bajaj Finance is NBFC, not a bank — TDS applies |
| TDS Threshold | ₹5,000 per financial year | Section 194A proviso | Practically always crossed in subvention deals |
| Expense Deductibility | Allowed as business expense | Section 37(1) ITA 1961 | Subvention is a sales promotion / financing cost |
| GST Return Reporting | Report in GSTR-3B & GSTR-2B | CGST Rules 2017 | Match ITC with GSTR-2B before claiming |
| TDS Return | File Form 26Q quarterly | Section 200 ITA, Rule 31A | Bajaj Finance claims credit via Form 26AS / AIS |
| GST on Advance Payment | Time of supply = invoice date or payment date (earlier) | Section 13 CGST Act | Track payment timelines to avoid short ITC claim |
Each of these compliance positions has specific procedural requirements and deadlines. The sections below explain each in detail, with practical guidance for brands processing these invoices.
Understanding the Interest Subvention Mechanism
Before diving into tax treatment, it is important to clearly understand why this invoice arises and what economic transaction it represents. The subvention mechanism is the backbone of every "0% EMI" or "No Cost EMI" campaign that brands run through Bajaj Finance.
How the 0% EMI / Subvention Scheme Works
In a standard subvention arrangement, three parties are involved: the brand (manufacturer or dealer), Bajaj Finance (the NBFC), and the end customer. The mechanism works as follows:
- Step 1 – Agreement: The brand enters into a subvention agreement with Bajaj Finance. The brand agrees to compensate Bajaj Finance for the interest that would otherwise be collected from the customer over the EMI tenure.
- Step 2 – Customer Purchase: The customer buys the brand's product (e.g., a smartphone, home appliance, two-wheeler) and opts for a 0% or low-interest EMI plan through Bajaj Finance. The customer pays only the principal amount as EMIs — no interest.
- Step 3 – Bajaj Finance Disburses: Bajaj Finance disburses the full loan amount to the brand/dealer immediately. This is essentially a loan at market interest rate extended to the customer.
- Step 4 – Brand Pays Subvention: Bajaj Finance raises an invoice on the brand for the interest forgone — this is the interest subvention. The brand pays this amount to Bajaj Finance, effectively subsidising the customer's interest cost.
- Step 5 – Reconciliation: At the end of each month or quarter, Bajaj Finance provides a statement of loans disbursed, corresponding subvention amounts, and raises a consolidated GST invoice for the service rendered.
What the Invoice from Bajaj Finance Represents
The invoice you receive from Bajaj Finance is not merely a debit note or a cost reimbursement. It is a proper tax invoice for a financial intermediary service rendered by Bajaj Finance — specifically, the service of structuring and administering a subsidised EMI facility for your customers. This is a taxable supply under GST law.
The typical invoice will contain:
- Invoice Details: Bajaj Finance's GSTIN, address, invoice number, and date.
- Description of Service: "Interest Subvention / Subvention Charges for EMI scheme for [period]" — often referencing the underlying subvention agreement.
- SAC Code: 997119 — Other Financial Services (excluding investment banking, insurance and pension services).
- Taxable Value: The subvention amount (net of TDS if applicable, but invoiced on gross).
- GST Components: CGST @ 9% + SGST @ 9% (intra-state) OR IGST @ 18% (inter-state), totalling 18%.
- Total Amount Payable: Taxable value + GST (TDS to be deducted by the brand before payment).
GST Treatment on the Subvention Invoice
This is perhaps the most misunderstood aspect of the subvention arrangement. Many brands incorrectly attempt to treat the subvention as an exempt supply of "interest on loans," thereby refusing to accept the GST charged by Bajaj Finance. This is legally incorrect and must be avoided.
SAC Code 997119 – Nature and Applicability
SAC code 997119 falls under the classification "Other Financial Services (except Investment Banking, Insurance Services and Pension Services)" as defined under the GST tariff for services (Chapter 99, Heading 9971, Group 99711). Bajaj Finance uses this code because the subvention arrangement is a fee-based financial service — it is Bajaj Finance's compensation for structuring the EMI product, not interest paid by a borrower.
| SAC Hierarchy | Code | Description |
|---|---|---|
| Chapter | 99 | Services (All) |
| Heading | 9971 | Financial and Related Services |
| Group | 99711 | Financial Services (excl. investment banking, insurance, pension) |
| Service Code | 997119 | Other Financial Services (Residual) – Subvention Charges |
Is It Exempt as "Interest"? – Key Ruling and Legal Position
The GST exemption for "interest or discount" under Sl. No. 27 of Notification 12/2017-CT(R) applies specifically to interest charged by a lender on money lent to a borrower. In the subvention model, it is the brand paying the NBFC — the brand is not a borrower and the subvention is not "interest on a loan." It is a service fee for the financial structuring done by Bajaj Finance.
Key Legal Position: The Andhra Pradesh AAR in the case of Mercedes-Benz Financial Services India Pvt. Ltd. and the Maharashtra AAR in similar captive NBFC cases have consistently held that subvention payments by a brand to an NBFC/financial services company for administering a subsidised EMI scheme constitute a taxable supply of financial services at 18% GST — they are NOT exempt as interest income.
The CBIC has also clarified through FAQs on EMI/subvention schemes that the economic character test must be applied: if the payment is compensation for a financial service (structuring an EMI facility), it is taxable; if it is purely interest on a loan, it may be exempt. In a brand-NBFC subvention model, the former applies.
Input Tax Credit (ITC) Eligibility for the Brand
The good news for brands is that since the subvention invoice is a valid taxable supply with properly charged GST, the brand is entitled to claim Input Tax Credit (ITC) on the GST paid, subject to fulfillment of Section 16 conditions of the CGST Act.
- Condition 1 – Valid Tax Invoice: Bajaj Finance must issue a proper GST invoice with their GSTIN, SAC 997119, and correct GST amount. The invoice must match in GSTR-2B of the brand.
- Condition 2 – Receipt of Service: The service (EMI scheme administration for the brand's customers) must have been received. This is evidenced by the subvention agreement and disbursement reports.
- Condition 3 – Tax Actually Paid: Bajaj Finance must have actually paid the GST to the government. This is verified through GSTR-2B reconciliation.
- Condition 4 – Used for Business: The subvention is a sales promotion / customer acquisition expense — clearly a business purpose. ITC is therefore admissible.
- Condition 5 – Not Blocked: ITC on financial services is NOT blocked under Section 17(5) CGST Act. The blocked ITC list primarily covers motor vehicles, food, health, and employee-related expenses — subvention charges are outside this list.
Practical Step: Reconcile the ITC on subvention invoices with GSTR-2B every month before claiming in GSTR-3B. Rule 36(4) restricts ITC to amounts appearing in GSTR-2B, so delays in Bajaj Finance's GSTR-1 filing can temporarily block your ITC claim.
TDS Obligations of the Brand on Subvention Payment
This is the most critical compliance area and the one where brands most frequently default, resulting in significant tax demands. When a brand pays subvention to Bajaj Finance (an NBFC), TDS under the Income Tax Act is mandatory.
Why TDS Applies – Bajaj Finance is an NBFC, Not a Bank
Section 194A of the Income Tax Act requires TDS on interest paid to persons other than banks. Crucially, the Section 194A exemption under the proviso (which exempts scheduled banks, co-operative banks, etc.) does not apply to NBFCs. Bajaj Finance is a deposit-taking NBFC — it is not a scheduled bank. Therefore, TDS under Section 194A applies on the subvention paid to Bajaj Finance.
| TDS Section | When Applicable to Subvention | Rate | Threshold | Remarks |
|---|---|---|---|---|
| Section 194A | Subvention characterised as interest / interest equivalent payment to NBFC | 10% | ₹5,000 p.a. | Most commonly applied; Bajaj Finance is not a scheduled bank |
| Section 194J | Subvention treated as professional/technical service fee | 2% (technical) / 10% (professional) | ₹30,000 p.a. | Applicable if agreement explicitly describes it as a service fee |
| Section 194H | Subvention treated as commission or brokerage for arranging EMI | 5% | ₹15,000 p.a. | Less common; argued where NBFC is purely acting as intermediary agent |
| Section 195 | If Bajaj Finance or its group entity is a foreign company | As per DTAA / applicable rates | No threshold | Rare; Bajaj Finance Ltd. is Indian entity — 195 generally not applicable |
Recommended TDS Treatment for Brands
Based on the predominant position taken by tax authorities and affirmed in multiple assessments, the safest and most defensible approach is as follows:
- Deduct TDS @ 10% under Section 194A on the subvention amount (excluding GST, as TDS on GST component is generally not required where GST is separately disclosed on the invoice — per CBDT Circular No. 23/2017 read with Circular 1/2014).
- Deposit TDS by the 7th of the following month (30th April for March payments) using Challan ITNS 281.
- File Form 26Q quarterly (by 31st July, 31st October, 31st January, and 31st May for the last quarter).
- Issue Form 16A to Bajaj Finance within 15 days of the due date of TDS return (i.e., by 15th August, 15th November, 15th February, 15th June respectively).
- Ensure TAN registration: The brand must have a valid Tax Deduction Account Number (TAN) for making TDS payments and filing returns.
Consequence of Non-Deduction: If TDS is not deducted or short-deducted, the brand will be treated as an "assessee-in-default" under Section 201(1). This leads to: (a) demand for TDS amount + simple interest @ 1.5% per month under Section 201(1A); (b) penalty under Section 271C equal to the TDS amount; and (c) 30% disallowance of the subvention expense under Section 40(a)(ia), resulting in increased tax liability for the brand.
TDS on GST Component – Clarification
As per CBDT Circular No. 23/2017, TDS under Section 194A (and most other TDS sections) is not required on the GST component of the invoice, provided that GST is separately shown on the invoice and is not included in the taxable base. This means TDS should be calculated only on the subvention amount excluding GST.
Accounting Treatment in the Brand's Books
Correct accounting is essential not just for financial accuracy but also for tax audit purposes. The subvention payment must be classified correctly as a revenue expense (not capital), and the TDS and GST entries must be recorded precisely.
Journal Entries on Receipt of Subvention Invoice
Assume: Subvention Invoice from Bajaj Finance for ₹1,00,000 + GST @ 18% (₹18,000) = Total ₹1,18,000. TDS @ 10% on ₹1,00,000 = ₹10,000. Net payment to Bajaj Finance = ₹1,08,000.
--- On Receipt of Invoice ---
Dr. Interest Subvention Expense A/c ₹1,00,000
Dr. Input Tax Credit – IGST/CGST+SGST A/c ₹18,000
Cr. Bajaj Finance A/c (Creditor) ₹1,18,000
--- On Payment to Bajaj Finance ---
Dr. Bajaj Finance A/c (Creditor) ₹1,18,000
Cr. TDS Payable A/c (194A) ₹10,000
Cr. Bank A/c ₹1,08,000
--- On Deposit of TDS to Government ---
Dr. TDS Payable A/c ₹10,000
Cr. Bank A/c ₹10,000
--- On Filing Form 26Q and Issuing Form 16A ---
(No accounting entry; procedural compliance only)
Expense Classification
The Interest Subvention Expense should be classified under "Sales Promotion Expenses" or "Financing Cost – Customer EMI Scheme" in the profit and loss account. It is a fully allowable business expense under Section 37(1) of the Income Tax Act, as it is incurred wholly and exclusively for the purpose of the brand's business — specifically to drive sales through attractive financing for customers.
Note for Brands Offering Product Discounts vs. Subvention: Some subvention agreements are structured as a net discount model, where Bajaj Finance disburses a lower upfront amount to the brand (net of subvention). In such cases, the accounting differs — the brand books lower revenue rather than a separate expense. The GST and TDS positions however remain broadly similar and should be evaluated based on the actual agreement structure.
Impacted Categories – Who Is Affected?
The interest subvention compliance framework described in this guide is relevant to a wide range of businesses. Understanding whether you are in the impacted category helps prioritise your compliance action plan.
| Category | Examples | Impact | Priority |
|---|---|---|---|
| Consumer Electronics Brands | Samsung, LG, Apple distributors, Sony, OnePlus | High – most EMI schemes run through Bajaj Finance | Very High |
| Home Appliance Manufacturers | Voltas, Godrej, Whirlpool, Haier, Daikin | High – seasonal EMI offers on ACs, refrigerators, washing machines | Very High |
| Two-Wheeler and EV Brands | Hero, Honda, TVS, Ola Electric, Ather | High – financing is critical for vehicle purchases | Very High |
| Furniture and Lifestyle Brands | IKEA, Urban Ladder, Pepperfry, Sleepwell | Medium – EMI schemes used for big-ticket furniture | High |
| Jewellery Brands | Tanishq, Kalyan Jewellers, Senco Gold | Medium – gold/diamond jewellery EMI offers | High |
| EdTech and Healthcare Brands | BYJU'S, Vedantu, Apollo Health | Medium – education and health EMI schemes | Medium |
| Real Estate Developers | Builders offering subvention schemes | Medium – subvention on under-construction home loans | Medium |
| E-Commerce Platforms | Amazon, Flipkart, Meesho (brand partners) | Indirect – platforms coordinate with brand for subvention cost | Medium |
Timeline of Key Events and Regulatory Changes
Understanding the evolution of the regulatory framework helps brands appreciate why strict compliance is now non-negotiable. The landscape has shifted considerably since the introduction of GST in 2017.
| Year / Period | Event / Development | Impact on Brands |
|---|---|---|
| Pre-2017 (Service Tax era) | Subvention treated inconsistently; some treated as exempt, others as taxable financial service | Ambiguity in compliance; some brands did not pay service tax on subvention |
| July 2017 | GST introduced; SAC 997119 created for "Other Financial Services" at 18% | Subvention clearly falls under taxable supply; 18% GST mandated |
| 2018-19 | First wave of GST notices to NBFCs and brands on subvention classification | Brands started receiving notices questioning ITC claims on subvention invoices |
| 2019 | AP AAR on Mercedes-Benz Financial Services – subvention = taxable supply, not exempt interest | Landmark ruling; confirmed 18% GST and ITC eligibility for payer brand |
| 2020-21 | CBDT Circular 23/2017 reaffirmed; TDS not on GST component | Brands clarified on TDS base — only on subvention amount, not GST |
| 2021-22 | Income Tax audits of large brands for TDS defaults on subvention payments to NBFCs | Increased scrutiny; several brands received 40(a)(ia) disallowance demands |
| 2022-23 | CBIC FAQ on No-Cost EMI: confirmed taxability of subvention as financial service | Removed ambiguity; all brands expected to comply with 18% GST and ITC claims |
| 2023-24 | Rule 36(4) GSTR-2B restriction tightened; ITC must match GSTR-2B | Brands must reconcile monthly; delays in Bajaj Finance's GSTR-1 affect ITC timing |
| FY 2024-25 | Finance Act 2024: TDS rates unchanged; enhanced penalty enforcement under Section 271C | Higher risk of penalty for non-deduction of TDS on subvention to NBFCs |
| FY 2025-26 (Current) | No major structural changes; established framework continues; increased AI-driven scrutiny by CBIC | Full compliance expected; GSTN data matching flags mismatches automatically |
Critical Cut-Off Dates for Brands
| Compliance Action | Cut-off / Due Date | Consequence of Missing |
|---|---|---|
| TDS Deposit (all months except March) | 7th of the following month | Interest @ 1.5% p.m. under Section 201(1A) |
| TDS Deposit for March | 30th April | Interest @ 1.5% p.m. from 1st April |
| Form 26Q – Q1 (Apr–Jun) | 31st July | Late filing fee ₹200/day under Section 234E |
| Form 26Q – Q2 (Jul–Sep) | 31st October | Late filing fee ₹200/day under Section 234E |
| Form 26Q – Q3 (Oct–Dec) | 31st January | Late filing fee ₹200/day under Section 234E |
| Form 26Q – Q4 (Jan–Mar) | 31st May | Late filing fee ₹200/day under Section 234E |
| ITC Claim in GSTR-3B | Must appear in GSTR-2B; claim by 30th November of next FY (annual deadline) | ITC lapse under Section 16(4) CGST Act |
| GST Payment on outward supplies | 20th of following month (GSTR-3B) | Interest @ 18% p.a. under Section 50 CGST Act |
Important Deadline Alert: The ITC on subvention invoices for FY 2024-25 must be claimed by 30th November 2025. Any missed invoices after this date cannot be carried forward for ITC. Brands must reconcile and claim promptly.
Frequently Asked Questions (FAQs) on Interest Subvention Invoice from Bajaj Finance
What is interest subvention and why does Bajaj Finance raise an invoice for it?
Interest subvention is the amount that a brand (manufacturer or dealer) pays to Bajaj Finance to compensate it for the interest cost that the end customer does not pay in a 0% EMI or No-Cost EMI scheme. Bajaj Finance raises a tax invoice because this payment is a fee for a financial intermediary service — structuring and administering the subsidised EMI facility — which constitutes a taxable supply under GST at 18% under SAC 997119.
Which SAC code does Bajaj Finance use on the subvention invoice and why?
Bajaj Finance uses SAC code 997119 — "Other Financial Services (excluding investment banking, insurance services and pension services)." This is the correct residual SAC code under GST Chapter 99 for financial services that do not fit specific codes like deposit services (997112) or credit guarantees (997113). The subvention service is a specialised financial arrangement that falls in this residual category.
Can the brand claim ITC on GST charged by Bajaj Finance in the subvention invoice?
Yes. The brand can claim Input Tax Credit (ITC) on the GST paid to Bajaj Finance, provided: (a) it holds a valid GST tax invoice from Bajaj Finance; (b) the supply is reflected in GSTR-2B of the brand; (c) Bajaj Finance has actually paid the GST; and (d) the brand is registered under GST and uses the service for business purposes. The subvention service is not a blocked ITC item under Section 17(5) CGST Act.
Must the brand deduct TDS before paying Bajaj Finance? Which section applies?
Yes, TDS deduction is mandatory. Bajaj Finance is an NBFC — it is not a scheduled bank — so the TDS exemption for banks under the proviso to Section 194A does not apply. The most commonly applied section is Section 194A at 10% (where subvention is treated as interest-equivalent). Some brands also deduct under Section 194J (2% for technical services) or 194H (5% for commission) depending on how the agreement is structured. When in doubt, Section 194A @ 10% is the safest approach.
Should TDS be deducted on the GST amount in the Bajaj Finance invoice?
No. As per CBDT Circular No. 23/2017, TDS is not required to be deducted on the GST component of an invoice, provided GST is separately shown on the invoice and is not included in the base amount. Therefore, TDS under Section 194A should be computed only on the subvention amount excluding GST. For example, if the invoice is ₹1,00,000 + ₹18,000 GST, TDS of 10% is deducted only on ₹1,00,000 = ₹10,000.
Is the subvention payment exempt from GST as it relates to a loan and interest?
No. The GST exemption under Sl. No. 27 of Notification 12/2017-CT(R) covers "interest or discount on the extension of credit." This applies to interest charged by the lender (Bajaj Finance) on the borrower (customer). It does not apply to the subvention paid by the brand to Bajaj Finance, because the brand is not a borrower — it is paying a service fee for the financial arrangement service. The Andhra Pradesh AAR in the Mercedes-Benz captive NBFC case and CBIC FAQs on No-Cost EMI both confirm this position: subvention is a taxable financial service at 18% GST.
What happens if the brand fails to deduct TDS on subvention payments?
The consequences are severe: (a) The brand is treated as an "assessee-in-default" under Section 201(1); (b) Simple interest @ 1.5% per month is charged on the TDS amount from the due date of deduction under Section 201(1A); (c) A penalty equal to the TDS amount can be levied under Section 271C; and (d) The entire subvention expense (not just the TDS) can be disallowed at 30% under Section 40(a)(ia), significantly increasing the brand's taxable income. This means on a ₹1 crore subvention, the tax demand including disallowance, interest, and penalty can exceed ₹50 lakhs.
How should the subvention expense be classified in the brand's accounts?
The interest subvention expense should be classified as a revenue expense under "Sales Promotion Expenses" or "EMI Subvention / Financing Cost" in the Profit and Loss Account. It is not a capital expense. It is fully deductible under Section 37(1) of the Income Tax Act as it is incurred wholly and exclusively for business purposes — specifically, to make the brand's products more attractive to customers through subsidised financing.
What is the due date to deposit TDS deducted on subvention payments to Bajaj Finance?
TDS must be deposited by the 7th of the month following the month of deduction, for all months except March. For deductions made in March, the extended due date is 30th April. Late deposit attracts simple interest at 1.5% per month from the date of deduction to the date of actual payment under Section 201(1A).
What form does the brand use to file TDS return for subvention payments, and when?
The brand must file Form 26Q for TDS deducted on non-salary payments, including subvention to Bajaj Finance. The quarterly due dates are: Q1 (April–June): 31st July; Q2 (July–September): 31st October; Q3 (October–December): 31st January; Q4 (January–March): 31st May. After filing, the brand must issue Form 16A (TDS certificate) to Bajaj Finance within 15 days from the due date of the TDS return. Late filing attracts a fee of ₹200 per day under Section 234E (subject to a maximum of the TDS amount).
Does the brand need to reverse ITC if the subvention arrangement is for exempt supplies?
ITC reversal under Rule 42/43 CGST Rules is required only if the subvention-related supplies made by the brand include exempt outputs. If the brand uses the subvention arrangement exclusively for taxable goods (e.g., electronics, appliances), no ITC reversal is needed. If the brand has a mix of taxable and exempt supplies, proportionate ITC reversal may be necessary. Most consumer goods brands operate entirely in taxable territory, so this is rarely an issue in practice.
How does the No-Cost EMI model differ from a traditional loan disbursement, and does it change the tax treatment?
In a No-Cost EMI model, the merchant (brand or retailer) typically gives a discount on the product that offsets the interest charged by the lender. In a Subvention model, the brand pays the interest component to Bajaj Finance directly. The tax treatment differs: in the No-Cost EMI (discount) model, the brand reduces its revenue; in the Subvention model, the brand records a separate expense and Bajaj Finance charges GST on that service. From a compliance standpoint, the subvention model (with a formal invoice from Bajaj Finance) triggers clear GST @ 18% on SAC 997119 and TDS obligations, as discussed throughout this guide.
Conclusion: Stay Compliant, Claim Your ITC, and Protect Your Deductions
Receiving an interest subvention invoice from Bajaj Finance is a routine but compliance-intensive transaction for any brand running 0% or reduced-interest EMI schemes. The invoice under SAC 997119 with 18% GST is a legitimate and taxable financial service charge — not an exempt interest payment — and must be treated accordingly. Brands have a clear right to claim ITC on the GST component, provided the invoice matches in GSTR-2B and all Section 16 conditions are met.
On the income tax side, deducting TDS at 10% under Section 194A before remitting payment to Bajaj Finance is non-negotiable. Bajaj Finance is an NBFC, not a bank, and does not enjoy the TDS exemption extended to scheduled banks. Timely TDS deposit, quarterly Form 26Q filing, and issuance of Form 16A are essential steps in the compliance chain. Missing any of these deadlines triggers interest, penalties, and the dreaded 30% expense disallowance under Section 40(a)(ia).
In summary: accept the invoice, verify SAC 997119 and 18% GST, claim ITC in GSTR-3B after GSTR-2B reconciliation, deduct TDS @ 10% under Section 194A on the base amount (excluding GST), deposit TDS on time, and file Form 26Q quarterly. This simple compliance checklist, consistently followed, will protect your brand from costly tax demands and ensure your subvention expense remains fully deductible.