In what would be a slight relief in the turbulent times that banks across the country are going through in the recent period, a senior official of the Department of Financial Services said that free banking services including withdrawals from ATMs (up to a certain amount of transactions), cheque deposits, balance enquiry, and so on, will not fall under the ambit of GST (Goods and services tax). Recently, banks across the country received a tax notice between the 2012-2017 period for the so-called “free services” offered to customers. According to tax officials, the free services offered by banks were not free after all as banks charge their customers a non-maintenance penalty for customers that fail to maintain the average monthly balance.
To clear the air, the Department of Financial Services approached the Revenue Department, and following their discussion, an official of the Revenue Department said that they will pass on the message to the Department of Finances that free services are unlikely to come under GST. Backing banks in this regard, the Department of Financial Services said that they are in the opinion that free services such as cheque deposits, account statement balance enquiry, ATM withdrawals, etc., up to a certain limit, barring commercial activities cannot be brought under the ambit of GST despite the notice sent by tax officials to banks. To state their case, bank said that customers are offered varying average monthly minimum balance slabs (depending on the type of account they have availed and hold), and based on the average monthly minimum balance slab, free services are provided to customers.