Financial institutions have been fending off the service taxes and GST notices since April 2018 and this has again led to a dysfunctional relationship between banks and Government of India.
The Government has levied Rs 18,000 crore goods and services tax (GST) on banks for their services like wealth management, zero-fee lockers, ATM facilities etc. Financial institutions have scuffled with the government and went to court over this matter. An animosity between banks and government has become the run of the mill and the government is dealing with this matter since 2015.
According to some sources, the tax notices related to service tax and GST have been sidestepped by the private, public and foreign banks since April 2018, as they prefer to present representations at different forums before stepping ahead towards the Delhi High Court regarding the notices.
The Delhi High Court has asked banks to respond to the government notices regarding the dues of Rs 18,000 crore GST applicable to bank services including lockers with zero annual rent, deposits and wealth management. August-end has been set as the deadline to answer the notices, by the Delhi HC.
The government is accusing public banks of deceiving the taxes to upkeep the Monthly Average Balance (MAB). For instance, Banks catered locker facility to the customer in exchange for a deposit worth Rs 50,000, rather than at a yearly rent of Rs 20,000 for a locker facility because of applicability of Rs 360 GST on the rent while deposits do not germinate any liability towards the government revenue.
At the same time, Foreign and private banks provided free facilities including free ATM and debit card along with other offers and wealth management service to the “premium account holders” which has abbreviated their contribution in the government treasury.
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However, according to the bankers, these practices were a part of the normal course of practices and were not initiated with an intent to avert the tax obligation