Indian banks have approached the government to amend the draft Goods and Services Tax (GST) law so that the transactions between two branches of a bank could engage tax. In the present structure, transactions between two branches of the same bank will involve a tax, which could become a mess on a later stage after the GST rollout.
The banks believe that the tax will become a mess because the transactions are carried out in large numbers and it will not be possible for the financial institutions and banks to value the services and eventually pay GST on those services. In a written statement, banks have urged the government to amend the draft GST law indicating ‘self-supply’ of services. According to some sources, the government may look into making changes to the draft GST law shortly.
Read Also: For GST India, Download GST Helpline Mobile App
“The valuation of supply of services can trigger dispute, prone to misinterpretation and promote corruption. If the provision remains, branch to branch transactions in banks or similar transactions in other sectors need to be valued and should be taxed,” says Sachin Menon, national head, indirect tax, KPMG India.
“There are thousands of branches and sales offices in case of some of these service providers and the interaction between establishments is numerous,”said Uday Pimprikar, partner, tax & regulatory services, EY India. Industry experts point out that the current GST law suggests that supplies between two registrations of the same entity should be liable to GST.
“There is no need to levy GST on the inter-branch supply of services. To distribute credit, there is already a simpler concept of input service distributor,” says Dharmesh Panchal, India West Indirect Tax leader, PwC.
Prominent banks including, SBI, ICICI and HDFC, have requested the government to revise the GST framework comprising self-supply of services. Banks have communicated with the GST committee in written claiming that they would not be able to comply with such a law as it’s impossible to appreciate such services.
