In an extremely shocking transformation, the Directorate General of Goods and Services Tax Intelligence (DGGST) has raised a question about the ‘free services” that banks had been offering to their customers and have asked them to pay tax on those services. All of the leading banks like State Bank of India, HDFC Bank, ICICI Bank, Axis Bank and Kotak Mahindra Bank are all among those who might have to participate in this new rule. Rest of the banks might also be contacted very soon for the same.
What is this tax for?
Earlier, every bank used to charge an amount from their customers if they failed to maintain the required minimum balance. In lieu of this charge, banks used to provide these basic banking services like ATM withdrawals, chequebooks, internet and mobile banking, etc. But for the customers who regularly maintained the minimum balance, no extra charge was deducted and the banking services were still offered.
So, now with this new transformational move, the tax authorities want these services to also be taxed. So in any case, if bank generates revenue after charging their customers for maintaining the low account balance, that amount of money will have also have to be taxed.
For example, last year, SBI collected Rs. 1, 771 crores of money by charging the customers for maintaining low account balance, this kind of money generation can now face the tax inspection.
For now, it is estimated that banks will be liable to pay up to Rs. 6000 crore as tax for all the banking services provided by them to the customers along with the revenue made from low balance charges.
An Axis Bank spokesperson recently confirmed the news by saying, “We are in receipt of the said notice, which we understand, related to an industry-wide matter. We are, currently, engaged with experts to evaluate the observations made in the SCN”
Now the major dilemma that the banks are facing right now is how they will ask the customers to pay the charge as they are already doing so and increasing the amount can backfire, and if not, how will they pay the tax to the tax department.