New Delhi: Customers who maintain a minimum balance in their account will have to pay for free services like ATM cards and chequebooks as these services will attract the Goods and Services Tax (GST), and top banks such as State Bank of India, ICICI Bank and HDFC Bank are planning to pass on this cost to the account holders, says an Economic Times report.
In the last two months, the tax department has sent notices to lenders seeking to levy GST on services such as issuing chequebooks and additional credit cards, ATM usage and refund of fuel surcharge, the report said. It may be noted that the GST notices are separate from those served in April to extract as much as Rs 40,000 crore in service tax and penalties from the country’s banks.
VG Kannan, CEO of the Indian Banks’ Association, told ET: “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.” He went on add that how much an individual account holder would be charged would differ from bank to bank, depending on how the “free services are valued.”
The tax department maintains that customers keeping a minimum balance in their accounts get several free services that have a “deemed value” and are taxable. Tax experts highlighted that even after giving explanations following the service tax notices in April, banks were served fresh notices, the publication mentioned.
“We understand that industry has represented to ministry of finance. The GST FAQs also in a way accepts that free supply cannot be treated as consideration for maintaining minimum balances in bank accounts,” Dharmesh Panchal, deputy indirect tax leader at PwC India, told ET.
Several multinational banks such as DBS Bank and Citibank were also served the GST notices, the financial daily said citing people aware of the development.
The daily quoted Kannan as saying that most lenders are expected to start charging GST from December. “Banks would not pass on the service tax burden to customers as of now, that too could happen in future as we think the revenue department is sticking to its position,” he told ET.