As many as 19 banks have been asked to pay over Rs. 15000 crore tax on free services rendered to customers maintaining minimum account balance. This has come even as the government earlier clarified that such services do not arise tax implications.
Sources as quoted in a leading daily said the government asked banks to pay tax retrospectively in respect of the last 5 years. Further, if penalty and interest amount is added, the principal amount of Rs. 15,000 crore will increase to Rs. 35,000 crore.
HDFC Bank has been slapped with the highest tax demand of Rs. 6,500 crore while other private lenders that include ICICI Bank Ltd. and Axis Bank Ltd. The demand is not inclusive of penalty and interest amount.
Other banks that have been served tax demand notice include Yes Bank ( > Rs. 1000 crore), Kotak Mahindra Bank ( > Rs. 1000 crore), SBI ( Rs. 1000 crore) and DBS Bank (Rs. 250 crore).
In June this year, the government clarified that free services offered by banks to customers maintaining minimum balance amount will not attract GST implications. As per the officials quoted in the leading business daily report, few of the bankers received the demand notice a month ago. While the data from some 7 more banks is in the process of being collected.
In accordance with the notices served, tax amount will be charged on the penalty amount bank charges it customers for not complying with minimum balance requirements. The officials as well as representing banks said the tax implication will depend on the agreement or commitment that a bank enters into with its customers for providing some of the services on maintaining a certain pre-specified sum.
What this means for bank customers?
If the banks are asked to pay tax on such free services, the customers may have to shell-out higher tax for maintaining a minimum balance account .