FINANCE

Banks may start levying GST on free services provided to customers: Report

banks-may-start-levying-gst-on-free-services-provided-to-customers-report

These services include issuance of cheque books, additional credit cards, usage of ATMs and refund of fuel surcharge

Banks such as State Bank of India (SBI), ICICI Bank and HDFC Bank could start levying GST on services they currently provide for free, according to a report by The Economic Times.

These services include issuance of cheque books, additional credit cards, usage of ATMs and refund of fuel surcharge.

Over the past couple of months, the tax department has sent notices to all banks, asking them to start paying the government GST on services they provided free of cost to customers who maintain a minimum balance in their accounts.

Notices have also been sent to multinational banks DBS Bank and Citibank, sources told the paper.

“Most banks are now considering passing on the GST cost to the customer. This would be a pure pass-through and the amount would go directly to the government,” VG Kannan, CEO of the Indian Banks’ Association, told the news daily.

He added that how much customers would be charged would differ from one bank to another, as it would depend on how the free services being provided are valued.

Moneycontrol could not independently verify the story.

Most banks have agreed to levy a GST of 18 percent, sources told the paper.

“We have agreed in principle that we would start collecting GST from customers. The mechanics need to be worked out, but since we are not that big in retail banking, we will wait for the larger banks to come out with a methodology,” said a tax head at a multinational bank.

According to the tax department, these services have a “deemed value” and are taxable, ET reported.

“Most banks could start charging GST from December. While banks would not pass on the service tax burden to customers for now, that too could happen in future as we think the revenue department is sticking to its position,” Kannan was quoted as saying.

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