Rates of GST on the chit funds have been raised from the earlier 12% to 18%. This may raise the borrowing cost and benefits out of the chit fund.
- A chit fund is a close-ended group lending scheme. It is called ‘Chit Fund’ as a piece of paper is used for writing a bid amount, known as a chit.
- It doesn’t fall under the jurisdiction of the RBI but is a legal entity, registered with and regulated by, the state governments under the Chit Funds Act of 1982
- Each member contributes their share to the pool (fixed sum) and the lump-sum amount is given to the one-two win’s the bid or who is in need (but has to pay extra).
- Chit funds are the Indian versions of Rotating Savings and Credit Associationsfound across the globe.