CA Dilip Jain
Banking Sector is one of the most Important Sector in India. It contribution to GDP is 7.7%. It has generated huge generated huge employment in the economy.
1. Centralized Registration is not available under GST. Bank has to register separately for every state where they have a branch. (Section 22 of CGST Act). In case a bank has multiple branches in one State, only one registration is required for all the branches in that State.
2. As per Service definition given by section 2(102), Service means anything other than goods……… . By Interpeating this, Interest earned by bank will also be taxed in GST. Further Schedule III which describes activities or transaction which shall be neither treated as Supply of Goods or Services, no exemption is given to any of bank services. The GST Law in India should clarify if interest is outside the ambit of GST.
3. Inter Sale or Purchase of Foreign currency amongst bank or Authorized dealers of foreign exchange is also taxable in GST as no exemption is given.
4. Services by Reserve Bank of India are also taxable in GST as no exemption is given.
5. Under GST, A banking company or a financial institution including a non-banking financial company, engaged in supplying services by way of accepting deposits, extending loans or advances shall have the option to either comply with the provisions of sub-section (2), or avail of, every month, an amount equal to fifty per cent. Of the eligible input tax credit on inputs, capital goods and input services in that month and the rest shall lapse (Section 17(2)).
6. Banks have to Furnish 3 Return every month and an Annual Return.
7. Currently, Service Tax Rate is 15 percent. In GST, if it becomes 18% (assume), bank services are likely to be inflated such as Issue of Cheque books and demand draft.
8. GST is a Place of Supply based Tax Regime. Hence, for every transaction in GST, the bank will need to determine the place of consumption where GST will be paid.
9. Currently, If bank purchase asset like Computer etc they have to pay VAT on that but they are not getting credit of it. Under GST, they will get credit of this. In Case of Import of ATM Machine etc, they will get credit of IGST also.