DAINIK NATION BUREAU
Strange but true, Indian bank customers will have to spend more to do banking. Certain services may be costlier as banks may ask customers to pay more for free services like chequebooks and ATM cards but also increase charges across the board to pay a retrospective tax.
It is going to happen because the Prime Minister’s Office (PMO) refused to intervene after multiple meetings by Indian Banks’ Association (IBA) with the Finance Ministry failed to draw up a conclusion.
For the last two months, the tax department has issued preliminary notices to banks seeking to levy Goods and Services Tax (GST) on services such as issuing cheque books and additional credit cards, ATM usage and refund of fuel surcharge.
The GST notices are separate from those served in April to recover about Rs 40,000 crore in service tax and penalties from all banks, reports said.
In fact, the PMO has asked Indian Bank Association (IBA) to respond to show-cause notices issued by the Directorate General of Goods and Services Tax Intelligence.
Currently, banks charge customers with no-frills or zero-balance accounts for services like cheque books and ATM cards, but provide them free to those who have accounts that require a minimum balance. Most of the banks have agreed to start charging 18 percent GST on the free services.
According to reports, the principal amount sought from all banks put together is Rs 15,000 crore and is expected to increase to about Rs 35,000 crore if interest and penalty is added.
IBA confirmed that banks have informed the Reserve Bank of India (RBI) that they will need to recover the tax from customers for the last five years and pay to the Government as there was no other alternative.
This comes at a time when banks are also struggling to deal with their large pile of bad loans of over Rs 10.5 lakh crore, impacting their profitability.
with input of money control