GST: Yes on MF exit loads, no on free bank services
Interest charged on outstandi ng credit card dues i l ad t o u lf d Stockbroking services for non-residents like FPIS r ie r id b nk a f o s NEWDELHI: Free services provided by banks such as withdrawals from ATMS and issuance of chequebooks to customers will not be taxed under the goods and services tax (GST), the government clarified on Sunday, providing relief to financial institutions as well as consumers.
The government, however, said that interest charged on outstanding credit card dues, finance lease and exit fees paid by mutual fund investors will be taxable under GST. Since interest levied on loans are not taxed, any additional interest for delayed payment has also been kept out of GST.
These clarifications were made based on recommendations by one of the groups set up to address sector-specific concerns under the indirect tax regime that came into effect on July 1.
Free services provided by banks have become a major litigation issue with tax officials issuing notices to banks demand- ing tax for services provided free of cost before the implementation of GST.
Sunday’s statement also provides clarity on cases where a customer is serviced from multiple branches of a bank. In such a case, the location of the supplier of services will be the home branch of the customer. Banks and insurers also do not have to ascertain the place of consumption of services provided by them and can rely on the GST identification number provided by clients. Banks can also issue a consolidated tax invoice to clients at the end of a month, the government clarified.
Banks also need not register in states where they only have ATMS and no branches. These measures will reduce the compliance burden.
With the demand for centralized registration yet to be met, banks have to obtain registration in all states they operate and consequently file multiple returns. Pratik Jain, leader, indirect tax, PWC India, said it addresses most of the issues raised by the financial services industry.