Now Banks Might Charge You For Free Services Like ATM Transaction & More
Until now bank holders have not been charged by the banks for their ATM transactions, however, all of that is soon going to change now. According to the reports by the daily news portals, the Directorate General of Goods and Services Tax Intelligence (DGGST) has issued several notices to the banks in the country asking them to pay the levied service tax, penalties and interest of previous 5 years for providing the free services to their customers.
The notice has been sent out to country’s top lenders including State Bank of India, ICICI Bank, HDFC Bank, Axis Bank and Kotak Mahindra Bank. Many more banks are likely to be served notice by the Directorate General of Goods and Services Tax Intelligence (DGGST) on non-payment of taxes.
However, DGGST has got no response from any of these banks to their respective notices. Total tax liability could be about Rs 6,000 crore according to this official, but bankers fears it could be much more.
This move simply means that the banks will ultimately put the burden on customers eventually making them pay for the free services that they have been enjoying by now. In addition to that, it also means that the free services such as ATM transaction, chequebook and the issuing of debit cards.
This move came to in response to the account holders who fail to maintain the minimum account balance. For the purpose of tax calculation, the deemed value of these free services would be calculated as non-maintenance charges, which the bank levies when funds go below the minimum balance required.
The tax department claims that these free services actually have transactional value as they are used to incentivise customers for retail banking.
Banks are likely to contest claims of the department and also take it up with the government, an official that has received the notice said. To get an idea of the amount involved, the State Bank of India had in April-November 2017 collected Rs 1,771 crore from customers who have not maintained the required minimum balance. The bank has also reduced the charges from the current fiscal.
Due to the levied tax, they now have to rake up the charges for the free service. “They can claim it as input tax credit and offset it against their other tax liability,” stated one of the officials.Tax experts say this issue needs to be looked at carefully as it has wide ramifications for the banking sector.