MUMBAI: Many banks and financial institutions may be in for a lot of trouble as they could just see the complexity in paying taxes increase under the incoming goods and services tax (GST).
As GST stands today, transactions between two branches of same bank is set to trigger a tax, which could prove to be cumbersome. Indian banks have also approached the government to amend the rules regarding this.
ET had in January written that most of the major banks, both private and public sector ones, have approached the government to modify the GST framework involving self-supply of services, say people in the know. In a written communication to the GST committee, banks have claimed that they would not be able to comply with such a regulation as it’s impossible to value such services.
Experts point out that GST being levied on branch transactions could be cumbersome because of the enormous number of financial transactions being carried out and because it will be impossible for banks and finance institutions to value services provided by one branch to another and then pay GST on that. Banks have written to the government to amend the GST law involving such ‘self-supply’ of services.
Last week on Saturday, the consensus between states and the Centre would mean that the July 1 deadline looks achievable. The sales tax officers across India are being trained in different locations and are being prepared for the upcoming centralised tax law. About 20 lakh tax officers are already being trained.
Though change in the peak rate will not alter the four-slab rate structure of 5%, 12%, 18% and 28% agreed upon last year, but is only a provision being built into the model law to take care of contingencies in future. This means the central GST and state GST can be up to 20% each, leaving the scope for a maximum levy at 40%, say experts.
The GST Council has proposed to raise the peak tax rate to 20 per cent, from the current 14 per cent, in the model goods and services tax Bill to preclude the requirement of approaching Parliament for any change in rates in future.