GST on Chit Funds Explained: How Much You Really Pay

GST (Goods and Services Tax) is a single tax levied on the supply of goods and services in India. While the contributions or payouts in chit funds are not directly taxed under GST, there are parts of the service that are.

The key area where GST comes into play is the commission or service fees charged by the chit fund company. Managing a chit fund involves administrative tasks like organizing auctions, handling the collection of funds, and ensuring payouts are smooth. For these services, the chit fund company typically charges a commission. GST on chit fund commissions is applied at the rate of 18% on this commission or fee. So, if the company charges you for managing the fund, GST is added to that fee.

However, it’s important to note that the subscription amount you pay as a member—your regular contribution to the fund—is not subject to GST. Similarly, when you win the chit fund amount, that payout is also not taxed under GST. The tax applies only to the services the chit fund company provides, not the actual money flowing between members. This means chit fund GST rate is only relevant to the administrative services and not the actual contributions or winnings.

So, in simple terms, while chit funds themselves aren’t directly taxed, the service charges for running and managing the chit fund attract GST. If you’re part of a chit fund, you won’t see GST on your contributions or winnings—only on the company’s fees. 

Tax on chit fund returns follows a similar principle, where only the commission fees are subject to GST, and not the returns you receive as a member.

How GST is Calculated at Kopuram Chits

Let’s say you’ve joined a chit scheme worth ₹1 Lakh. The GST is calculated based on the company commission, which at Kopuram Chits is 7% of the chit value.

1. First, calculate the commission:

7% of ₹1,00,000 = ₹7,000

2. Next, GST is applied at 18% on the commission amount:

₹7,000 × 18% = ₹1,260.

So, the GST you will pay on a ₹1 Lakh chit scheme is ₹1260.

Digital chit funds also adhere to the same GST regulations.