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Annual fee: Banks face Rs 18,000 crore levy

Take govt to court over GST charge, HC asks them to respond to notices

Jul 22, 2019, 10.37 AM IST
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Tax authorities had launched a probe as early as 2015 after it received “source-based” information.
(This story originally appeared in on Jul 22, 2019)
New Delhi: After refusing to respond to tax notices for over a year, banks have now dragged the government to court over its move to levy service tax and GST on services offered to customers who maintain large deposits in return for getting facilities such as wealth management or lockers without paying an annual fee.

The government has alleged that through the depositbased services, cumulatively, over a dozen banks did not pay GST worth Rs 18,000 crore. While notices were issued in April 2018, instead of responding to them, banks chose to give representations at multiple forums before moving the Delhi high court, demanding a stay on proceedings. The court, while posting the matter for hearing a few months later, has asked the banks to respond to the notices by the end of next month.

Some of the foreign banks declined comment, while private lenders and state-run players did not respond to questionnaires emailed on Saturday afternoon. Bank executives said that it’s an industry issue and the Indian Banks’ Association has taken up the matter.

The government has accused the banks of bypassing the taxation process and avoiding service tax in return for maintaining Monthly Average Balance (MAB). The foreign and private banks are accused of having left behind a bigger dent for the exchequer as they offered multiple services under the wealth management umbrella.

Government sources cited the instance of a locker, where instead of an annual rent of Rs 2,000, the product is offered in return for a deposit of Rs 50,000. The rent would have helped the government get Rs 360 as GST but a deposit does not earn any tax for the government, they added.


In the same way, banks offer many other services such as free lounge facilities, cheque deposit, free ATM usage and debit cards, apart from investment services to premium account holders. Bankers said that this was “normal practice” and the idea was not to evade tax.

Tax authorities had launched a probe as early as 2015 after it received “source-based” information. Government officials said that the move is targeted at high-value customers and the tax demand does not involve basic or Jan Dhan accounts, as some banks were seeking to suggest.

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