DBS Bank challenges IGST on services offered to Singapore HQ

NEW DELHI | MUMBAI: Singapore-based DBS Bank has dragged the Indian government and GST council to the Delhi High Court after it was asked to pay integrated goods and services tax (IGST) on banking services provided to its head office in Singapore.

The Delhi High Court admitted a writ petition filed by DBS Bank (India) challenging certain sections of the IGST and issued notices to the government and the GST council to file appropriate replies in the matter. The case has now been posted for hearing on November 7.

The petition has been admitted by the division bench comprising Justice S Muralidhar and Justice Pratibha Singh. DBS has hired senior lawyers Abhishek A Rastogi and Rashmi Deshpande to appear on its behalf. An email query sent to Central Board of Excise and Customs and the revenue secretary on Thursday afternoon did not elicit any response till the time of going to press. When contacted, DBS Bank declined to comment.

Many foreign banks have started paying 18% GST on all the services they provide to their head offices outside India, said people familiar with the matter.

"Unlike under the service tax regime, all foreign banks are now burdened with an 18% IGST on various services rendered to their head offices outside India when the place of provision of the services is outside of India,” Rastogi told ET.

“This is huge cost for the banks and we have challenged the constitutional validity of the provisions of Section 7(5)(a) of the IGST Act to levy IGST as this is not an interstate supply. The Constitution and the preamble of the statute do not provide for taxation of these transactions." Industry trackers said that the government may have to come out with a clarification to sort out the issue.