The government has clarified the applicability of GST on certain banking, insurance and other financial transactions. Among other things, it has clarified that free services rendered by banks such as free ATM withdrawals will not be subject to GST.
However, the clarification does not settle the issue of GST on maintenance of minimum balance in accounts, according to some experts. This is because the minimum balance requirement is viewed as consideration for the banking service rendered.
Where services are provided by multiple branches to a customer, the branch where the account has been opened will pay GST and the other branches will be deemed to have rendered services to the main branch. Management and oversight provided by a head office to bank branches will be considered to be the supply of services and face GST, even if no consideration is charged. This can affect the costs of foreign banks operating in India. Mutual Fund exit loads have been brought under the purview of GST.
The table below summarizes the application of GST to the services in question:
|Type of Transaction||GST Applicable?|
|Mutual Fund Exit Loads||Yes|
|Late payment charges on outstanding credit card bills||Yes|
|Charges levied for loan defaults||Yes|
|Services provided by banks to the RBI||Yes|
|Insurance policies bought by NRIs||Yes|
|Free Banking Services (such as free ATM withdrawals)||No|
|Securitisation; Futures. Forward contracts in commodities where deliver isn’t taken.||No|