A statement by a finance ministry official confirms that there is no likely to be a GST on free banking services like ATM withdrawals and issuance of chequebooks.
“The revenue department is likely to tell the financial services department that GST will not be levied on free banking services,” an official said after the Department of Financial Services (DFS) asked its revenue branch to clarify issue related to the applicability of Goods and Services Tax (GST) on the various free services offered by Indian banks.
The step was also motivated by the recent news of many banks in India getting service tax notices for not paying tax on free services, after which the DFS had to approach the revenue department asking for clarification in this matter.
The service tax notice was offered for period 2012-2017 mentioning that banks should pay tax on non-free services. The free services offered by banks are not considered to be free since banks are indirectly charging customers by having them maintain a minimum balance in their saving accounts. The minimum average balance slabs are different for different banks, based on which banks provide these free services to their customers.
As of now, banking services such as the issuance of account statements and chequebooks and ATM withdrawals are mostly free with a limit on the number of transactions, however, commercial banking services are not free. These services are not under the cover of GST.
The Indian Banks Association (IBA) also recently raised the same issue on behalf of the management of various banks to the tax authorities.
