Mumbai: Finance minister Arun Jaitley ruled out a centralised registration for banks under the goods and services tax (GST) at a meeting with top bankers on Sunday.
At the same time, Jaitley agreed to allow banks to submit a single invoice per state per month instead of multiple invoices for each transaction, according to a banker familiar with the matter.
Currently, banks create a challan as an adequate invoice for claiming credit.
Jaitley was meeting members of the Indian Banks’ Association in Mumbai ahead of the rollout of GST on 1 July.
The government had recently announced setting up of industry-specific working groups to address concerns expressed by companies. These working groups, including one on banking and insurance, will work on procedural simplification and possible rate structures.
The government has also permitted a single centralized audit for tax assessment, despite multiple transactions across states, the person cited above said, requesting anonymity.
Banks had demanded a single centralized registration system, citing procedural and compliance hassles of registering in each state separately. States, which are part of the GST council rejected the demand because of concerns about a decline in revenue collections. “The genuine concern for banks like any other pan India service providers such as telecom, logistics, media and entertainment etc is the complexity of compliances and the consequential uncertainty it portends,” said Uday Pimprikar, tax partner, EY India. “It is imperative that the government considers several avenues to address these concerns including a centralised assessment set up, issuing detailed guidance notes as also rationalisation of some of the compliances.”
The meeting with Jaitley was attended by Indian Banks’ Association chairman Rajeev Rishi, who is also the chairman and managing director of Central Bank of India, State Bank of India chairman Arundhati Bhattacharya, ICICI Bank Ltd’s managing director Chanda Kochhar and Standard Chartered’s India head Zarin Daruwala.
Jaitley, however, asked bankers to decide on the valuation of tax to be charged on certain centralized services like IT and call centres, said one of the persons quoted above. For instance, a bank whose customer avails of online transaction service outside of his home branch, will be required to pay tax to the state where the transaction originated and also to that state where the bank’s head office is located as the IT services are centralized operations. IBA has been asked to work out this division of tax to be charged on services emanating from multiple states for a single transaction.
In a series of letters written to the chairman of GST Council, IBA has argued that taxing inter-branch/inter-state supplies will only increase cost, compliance and litigation, according to one person familiar with the matter.
The industry body has also made its case that identifying the branch from where the service is provided and where the service is ultimately consumed for more than 10 crore financial transactions per day is going to be a cumbersome task.
The law will, therefore, require restructuring of the Core Banking system (CBS) and IT software, which is unlikely to be completed by 1 July. According to IBA, these laws, if implemented in current form, will lead to a chaotic situation and banking operations will be adversely impacted.
