Term clearing house under GST

Posted on 22 April 2023 Category : GST terms

Meaning of term clearing house under GST

The details about term clearing house are explained here.

Clearing house:

A clearing house is a financial institution organized mostly by banks to exchange cheques ("checks" in American English) and payments. It should not be confused with central counterparty clearing (CCP) which also provides clearing services, but very differently by taking on the settlement risks of the counterparties (member banks and broker-dealers).

Clearing houses were formed to facilitate transactions among banks. Imagine a city with ten banks. Clients of each bank deposit checks daily drawn on any of the ten banks. Those drawn on the same bank as the depositor are easily processed. But cheques drawn on the other banks need to be presented to each bank in order to receive payments. All ten banks might have messengers taking cheques to the others, and waiting for payment. That would be long and cumbersome. Clearing houses solve this problem.

The details about GST rate changes for Clearing and Processing House services are being updated in this website. The notification changes on exemptions for GST for Clearing and Processing House services and other circulars related to GST for Clearing and Processing House services are updated in this website.

Goods and Service Tax (GST) rate tariff in India is designed in 6 categories of goods and services. Four main GST rate slabs framed with Essential goods and services, Standard goods and services and luxury goods and services with 5%, 12%, 18% and 28% respectively. Commonly used Goods and Services at 5%, Standard Goods and Services fall under 1st slab at 12%, Standard Goods and Services fall under 2nd Slab at 18% and Special category of Goods and Services including luxury - 28%. The most essential goods and services attract nil rate of GST under Exempted Categories. Luxury goods and services and certain specific goods and services attract additional cess than 28% GST.

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