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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.
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.
Here are some of the key events related to the issue of application of GST on free banking services:
- 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.
Keep a watch on this section to now the latest developments related to GST on free banking services such as ATM withdrawals.