Confusion Cleared: No GST On Free Banking Services Like ATM Withdrawals!
IT Dept. has issued a new notification, as per which, banks have been exempted from paying GST on these free banking services.
At last, the confusion over GST is cleared, when it comes to free banking services.
As per latest updates received, Income Tax Dept. won’t charge any GST on free banking services like ATM withdrawals and usage of cheques.
This is a big relief for the banks, as they were expected to pay up to Rs 45,000 crore on tax, retrospectively.
Free Banking Services To Be Free, With No GST!
In a very strange move, Income Tax Dept. last month had issued a notification wherein every bank was ordered to pay GST on free banking services rendered to bank customers who are maintaining minimum bank balance.
As per the new diktat, banks were supposed to pay GST on services such as ATM withdrawals, cheque book issuance and more.
This seemed illogical and totally unwarranted. The tax was supposed to be collected retrospectively, ever since GST regime came into force last year.
But now, the confusion has been finally cleared.
IT Dept. has issued a new notification, as per which, banks have been exempted from paying GST on these free banking services.
The new notification said,
“…where the services are supplied by a supplier without consideration to an unrelated recipient or a person other than a related or distinct person, the same would not amount to supply and not liable to GST,”
Yesterday, Govt. had informed that there shall be no GST at duty-free shops, albeit this exemption is only for foreigners.
However, there is still some ambiguity related to the notification sent to all banks. As per Pratik Jain, leader-indirect taxes at PwC India, it is not clear whether ‘show cause notices issued to banks under service tax are withdrawn or adjudication will be continued.’
GST For Financial Services
Meanwhile, in the same notification, Govt. has also declared that henceforth, there shall be GST on
- Exit loads charged by Mutual funds
- Interest charged on default loan payments
- Late payment charges levied by credit card companies
At the same time, there shall be no GST on:
- Securitisation
- Future contracts
- Derivatives
- Forward contracts in commodities
In the coming days, Govt. is expected to further clarify the GST related issues pertaining to financial services.
We will keep you updated.
