Goods and services tax or simply GST, which is going to be implemented from the 1st day of July, is definitely; affecting each service sector and banking is one amongst it. GST regime is something that is going to affect banking sector a much, this as a result will hamper the customer services and taxes too. For making you better understand it, here are the three major effects that GST going to have in the banking sector.
Registration for all Branches within a City: At present a bank with all India operation needs a single centralized registration, but with the implementation of GST every bank is supposed to obtain a separate registration from every state where it is in operation. In addition to registration, compliance burden about filing of returns has also increased substantially -in terms of the periodicity of returns, number of return formats and level of details required in these returns.
Input Tax Credit Leveraged and De-Leveraged: At the present time banks and NBFCs mainly choose the option of reversal of 50% of the CENVAT credit availed against inputs and input services, whereas CENVAT credit on capital goods could be availed with no reversal conditions. Under GST, 50% of the CENVAT credit availed against inputs, input services and capital goods is to be inverted which leaves them with a position of reduced credit of 50% on capital goods thereby hiking the capital cost.
Adjustment and Assessment is Difficult: Respective state regulator under which the branch is registered will do the assessment. Now, every registered branch of banks and NBFCs must justify its position on chargeability in the respective state and reason for utilizing input tax credit in different states. In the present time, a tax payer is pronounced by a single adjudicating authority on an issue involved. Under GST different adjudicating authority may take different view on the same issue. Difference in opinion can bring problem in adjustments.
These are the changes that banking sector is going to face after the GST regime. To understand the things better and it is required to read the complete guidelines of GST.
This article is provided as NRITAXSERVICE.COM, a firm of professionals, set up with its Head Office in New Delhi, India, and associate offices across India. It has our associate across the world in various countries.