New Delhi: Banks may soon be forced to stop all free services to customers. This comes amidst reports that tax authorities have sent notices to leading banks to cough up taxes for last five years for free services provided to customers who maintain minimum account balance.
Most banks waive off charges for services for customers who maintain minimum balance in their accounts. These include ATM transactions beyond a certain number, refund of fuel surcharge, issue of cheque books and debit cards, among others.
According to reports, the Directorate General of Goods and Services Tax Intelligence has sent notices to banks to pay tax on these free services provided to customers for the last five years, which includes the pre-GST era when service charges were implemented.
Banks which have been sent notices include SBI, ICICI Bank, HDFC Bank, Axis Bank and Kotak Mahindra Bank. Other banks too are expected to be served with notices in the coming days.
The DGGST is calculating tax on these free services on the basis of charges which banks have recovered from customers who do not maintain a minimum prescribed balance.
While the government is said to be calculating tax liability on banks to be `6,000 crore, bankers estimate that the tax dues could be much higher.
Banks will find it difficult to recover charges from customers retrospectively. But they may be forced to charge taxes in the future on free ATM transactions and other services, which will put a burden on bank customers.
Banks are likely to challenge the notice and take up the issue with the finance ministry.
The SBI had to cut charges it had levied on non-maintenance of minimum charges on saving accounts recently due to public anger.
The matter has already assumed political dimensions. “Your bank could soon charge you for ATM transactions, cheques and cards. Why??? Hint: Modi Govt? Taxes. Enjoy people. More #AchheDin are coming!," tweeted Congress leader Salman Soz.