The implications of goods and services tax (GST) on banks will be fully seen once it is implemented. GST Council members say that fine-tuning will be done as banks settle into the new system. Arundhati Bhattacharya, chairman of State Bank of India (SBI), said that for the retail customers, banks will pass on only the increased service tax. In a chat with Manju AB, Bhattacharya said SBI is ready for GST.
Will GST make banking and financial services more expensive?
The value of transactions for retail customers is not significantly high so increasing the rate of tax from 15% to 18% will not have much impact on retail customers. The bank is earning major income from corporate customers who will be registered under the GST and they will be able to take input tax credit benefit. GST will make banking and financial services more expensive in cases where the service tax climbs. For example, for all our services, we have listed out the cost of the service and service tax separately so the customer knows the cost of service and the tax.
Does interest component come under GST?
There is clarity on this. Interest will not be taxed under GST.
GST is applicable in the place you offer the service. How will you determine what taxes a Mumbai customer of SBI will have to pay if she uses an ATM in Shimla? In the case of B2B (business to business) transactions, the tax will be linked to GSTIN (GST identification number) of customer and for B2C (business to customer) transactions, the tax will be linked to address of the customer.
Banks also carry out trades in gold, silver and other commodities. What sort of taxes will you face here? There was some talk of a concessional taxation about 3% on gold and silver. How is this going to impact your incomes from the trade of these commodities?
There will not be any major impact because banks will get the additional benefit of input credit against tax on gold.
What about state-wise registrations and filing of returns? SBI will have to file around 1,891 tax returns annually considering that you are present in all the states and union territories and every state you have to make five filings -- GSTR-1 outward, GSTR-2 inward, GSTR-3 monthly, GSTR-6 input service and GSTR-9 annual returns.
In GST regime, the state-wise registration will lead to substantial increase in compliance levels, particularly given the fact that at present most banks have obtained a 'centralised' registration under service tax. So at present, a bank may be filing only two returns on an annual basis as a service tax assessee. In the GST regime, banks might be required to file more than 1,300 returns annually.
What about IT preparedness?
We will have an IT solution which will sit on top of the existing IT infrastructure. So the transactions will flow through the IT solutions and then through our systems. We cannot possibly change our IT systems at such a short notice.
