The tax department has reportedly asked top banks to pay tax on services offered for free to customers who maintain a fixed minimum balance.
These services include ATM transactions, issuance of chequebooks and debit cards, and refund of fuel surcharge, among others.
But ET reports the additional burden is likely to be passed on to customers, who might soon be charged for such services.
DGGST has sought tax on services for last 5 years
Currently, these services are chargeable for many customers, but free for those fulfilling certain conditions and maintaining a minimum balance.
These are then treated as ‘deemed services’ under the Service Tax Law.
The Directorate General of Goods and Services Tax Intelligence (DGGST) has now sent show cause notices to several banks, demanding levy on such ‘free’ services retrospectively for the last five years.
How is the tax being calculated?
The DGGST has already sent notices to SBI, HDFC, ICICI, Axis and Kotak. Others will get notices too, an official said.
Tax is being calculated after considering charges on these services levied by banks on customers who do not maintain minimum balance.
Tax will be levied on this ‘deemed value’ of the services.
ET estimates the total tax value at Rs. 6,000cr.
What does it mean for banks and customers?
Sources said banks are likely to contest the tax department’s claims. If that doesn’t work, they can take it up with the government.
But in case tax is actually levied, that will mean a high additional burden on these institutions.
They won’t be able to recover the costs from customers retrospectively, but going forward, they will likely start charging them.
Source by newsbytesapp