GST on ATM withdrawal & banking services

GST-on-free-banking

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Goods and Services Tax‭ (‬GST‭) ‬is one of the most significant reforms introduced in the history of the Indian fiscal revolution.‭ ‬With effect from July‭ ‬1,‭ ‬2017,‭ ‬GST is a consolidated tax that has replaced many indirect tax laws that previously existed in India.‭ ‬It is one indirect tax for the entire country that combines service tax,‭ ‬VAT and many other taxes that existed in the past.

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With the GST rollout,‭ ‬consumers now shell out more for banking services,‭ ‬insurance premium,‭ ‬and credit card bills.‭ ‬ However,‭ ‬in a major relief to customers,‭ ‬free banking services,‭ ‬such as cheque-book issuance and ATM withdrawals,‭ ‬are likely to remain out of the ambit of the GST,‭ ‬as informed by a‭ ‬senior finance ministry official.‭ ‬Final confirmation is yet to‭ ‬be received.‭ ‬

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Here‭ ‬are some of the key events related to the issue of application of GST on free banking‭ ‬services:

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  • When banks started getting‭ ‬tax notice for‭ ‬nonpayment of the levy on free services,‭ ‬the Department of Financial Services‭ (‬DFS‭) ‬approached the revenue department seeking‭ ‬clarity on whether such free banking services would attract GST or not.
  • DFS submitted that services such as‭ ‬the issuance of cheque-books,‭ ‬account statements and ATM withdrawals are free up to a certain limit and hence,‭ ‬are not commercial activities.‭ ‬With this logic,‭ ‬these free banking services‭ ‬cannot be brought under the ambit of GST.
  • The Indian Banks Association‭ (‬IBA‭)‬,‭ ‬on behalf of banks,‭ ‬too had made a representation to the tax authorities.‭ ‬Tax officials‭ ‬were of the view that banks were not offering‭ ‘‬free services‭’ ‬but actually charging customers by asking them to maintain a minimum account balance.

  • Every bank offers a different slab of minimum balance to customers,‭ ‬based on which some free services are provided.‭ ‬The latest consensus is‭ ‬that these services will not attract‭ ‬GST.

Know the GST registration process

Keep a watch on this section to now the latest developments related to GST on free banking services such as ATM withdrawals.

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