Which banking services are not under GST?
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, providing relief to financial institutions as well as consumers.
What will be taxed?
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.
Who has issued clarifications?
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 1 July.
Why the clarifications have been issued?
Free services provided by banks have become a major litigation issue with tax officials issuing notices to banks demanding tax for services provided free of cost before the implementation of GST.
What will be location of services?
Government statement also provides clarity on cases where customers are serviced from multiple branches. In such a case, the location of the supplier of services will be the customer’s home branch. Banks and insurers also do not have to ascertain the place of consumption of the services they provide and can rely on the client’s GST identification number. 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.
(Adapted from Livemint)