Govt Asks Banks To Pay Tax On Free Services Like ATM Transactions; Burden To Fall On Customers

The Logical Indian Crew

April 26th, 2018

Image Credit: Times Of India

The Directorate General of Goods and Services Tax Intelligence (DGGST) issued show cause notices to the country’s top banks including State Bank of India, ICICI Bank, HDFC Bank, Kotak Mahindra Bank and Axis Bank, demanding them to pay service tax, penalties and interests on the free services provided to their customers.

The tax will be levied on the services provided to minimum balance account holders for the last five years, including the pre-GST era for which the previous service tax cases can be opened. This could amount of thousands of crores of rupees.

Banks offer several free services to account holders who maintain a minimum balance. These services include – ATM transactions, issue of cheque books and debit cards and refund of fuel surcharge and more. Authorities have calculated the total tax liability after considering the charges that banks have recovered from customers who do not maintain a minimum account balance. The DGGST has presumed the recovered amount as the value for such services provided by the banks to their customers. Therefore, the tax is being levied on per account charge of the free services provided to their customers who hold a minimum balance.

An Axis bank spokesperson told The Economic Times, “We are in receipt of the said notice, which we understand, relates to an industry-wide matter. We are, currently, engaged with experts to evaluate the observations made in the SCN” (show cause notice),”

Another official raised concerns that the total tax liability could be about Rs 6,000 crores. However, bankers fear it could be much more than this estimated amount.

The notice has raised much apprehension among bank officials as they cannot collect retrospective tax from their customers. If the tax is upheld, customers would be the worst sufferers as they would have to bear the tax burden going ahead.

The Indian Banks’ Association is planning to lobby the government against this tax notice. “The association has already met once on the issue and has been empowered to take it up with the government,” State Bank of India’s chief financial officer Anshula Kant told The Economic Times, “The notice imputes value to every free service rendered by the bank which is not possible. Besides, they also want to do it retrospectively, which is difficult, to say the least.”

Tax experts opine that this issue requires being dealt with a lot of attention and scrutiny since it will pose a significant impact on the banking sector.

Pratik Jain, indirect tax leader at PricewaterhouseCoopers, said: “Banks provide banking services in all cases, including where customers are required to maintain a minimum balance. To break it into various components and infer it to be a distinct service does not seem to be the intention of the law.”

“If service tax has to be paid for the past period, ultimately the burden would fall on the consumers,” added Jain.

Share your thoughts..

Propelled by

VOLVO

Make Your City Safe

Related Stories

Banks Shut Down More Than 2,400 ATMs In Ten Months For Cost-Cutting

Govt Asks Banks To Pay Tax On Free Services Like ATM Transactions; Burden To Fall On Customers

SBI

SBI Closes Over 41 Lakh Savings Accounts For Not Keeping Average Minimum Balance 

SBI

SBI Slashes Charges For Non-Maintenance Of Minimum Balance In Savings Account Up to 70%

You Can Open SBI Basic Savings Account To Avoid Penalty For Not Maintaining Minimum Balance

SBI New Rules

SBI’s New Rules To Go Into Effect From Tomorrow; Know About Them

Latest on The Logical Indian

News

Fake WhatsApp Forward Claims Another Victim; Transgender Thrashed To Death In Hyderabad

Awareness

Women In Rural Uttar Pradesh Declare War On Skin Infections

News

Another Madhya Pradesh Farmer Dies At Mandi Waiting To Sell His Crop

News

Labour Party Calls For Removal Of Vedanta From London Stock Exchange After Thoothukudi Incident

Health

Nipah Virus Did Not Spread Through Bats; Bihar, Sikkim Issue Advisory: Reports

Others

70% Ganga Will Be Clean By 2019: Nitin Gadkari