The Goods and Services Tax (GST) Act, 2017, classifies “banking and financial services” under a broad umbrella, encompassing various financial activities provided by banks and other financial institutions. Here’s a breakdown of what falls under this category:

Services included:

• Accepting deposits:This includes current accounts, savings accounts, fixed deposits, recurring deposits, etc.
• Extending loans or advances:This covers term loans, overdrafts, credit cards, loans against property, etc.
• Cash management services:This includes services like cash collection, cash disbursement, payroll management, etc.
• Asset management and all forms of fund management:This covers services like portfolio management, mutual funds, venture capital funds, etc.
• Forex services:This includes buying and selling foreign currency, remittances, etc.
• Credit card and debit card services:This includes issuance, maintenance, and transaction processing of cards.
• Loan recovery services:This involves activities like tracing defaulters, negotiating settlements, and legal action for debt recovery GST Act 2017.
• Safe deposit locker services:This includes renting out lockers for the safekeeping of valuables.
• Other miscellaneous services:This includes services like payment gateway services, ATM services, etc.

Services excluded:

• Services provided by SEBI-registered intermediaries like stockbrokers, investment advisors, etc.
• Insurance services.
• Activities related to land and buildings, such as lease rentals or sale of property.
• Services provided by cooperative societies, except those related to banking and finance.

Important points to consider:

• The place of supply for banking and financial services is generally the location of the recipient of the service, as per Section 12(12) of the GST Act 2017.
• The GST rate applicable to these services can vary depending on the specific service provided. Some services are exempt from GST, while others attract a 5% or 18% rate.
• Banks and other financial institutions with an annual turnover exceeding the prescribed threshold are required to register under GST and levy the tax on their supplies.
• Registered businesses can claim input tax credit on the GST Act 2017. paid on banking and financial services used for their business purposes.

EXAMPLE

India’s banking and financial services sector is diverse and caters to a wide range of needs across different states. To give you a specific example, let’s take a look at the state of Maharashtra, a major financial hub in India:

Public Sector Banks:

• State Bank of India (SBI):SBI is the largest bank in India and has a significant presence in Maharashtra with over 2,000 branches. They offer a wide range of banking products and services, including savings accounts, current accounts, loans, credit cards, and wealth management.
• Bank of Maharashtra:This public sector bank is headquartered in Pune, Maharashtra, and has a strong focus on lending to the agricultural and small and medium-sized enterprises (SME) sectors in the state GST Act 2017.

Private Sector Banks:

• HDFC Bank:One of the largest private sector banks in India, HDFC Bank has a strong presence in Maharashtra with over 500 branches GST Act 2017. They are known for their focus on technology and innovation, offering a wide range of digital banking products and services.
• ICICI Bank:Another leading private sector bank, ICICI Bank has a significant presence in Maharashtra with over 400 branches. They offer a wide range of retail and corporate banking products and services.
• SKS Microfinance:SKS Microfinance is one of the largest  GST Act 2017MFIs in India and has a strong presence in Maharashtra. They provide small loans to low-income women entrepreneurs in rural areas.
• Ujjivan Financial Services:Ujjivan Financial Services is another leading MFI in India with a significant presence in Maharashtra. They provide a range of financial products and services to underserved communities.

These are just a few examples of the diverse banking and financial services offered in Maharashtra. The specific services available will vary depending on the individual’s needs and location GST Act 2017.

FAQ OUESTION

1. 
   Are banking and financial services taxable under GST Act 2017?

• No, most core banking and financial services are exempt from GST, including:
  • Interest on loan accounts
  • Deposit accounts
  • Cheques and drafts
  • Foreign exchange transactions
  • ATM transactions
  • Remittances

2. Which banking and financial services are taxable under GST Act 2017?

• Some specific services offered by banks and financial institutions are taxable under GST Act 2017 at a rate of 18%, such as:
  • Credit card annual fees
  • Late payment charges
  • Processing fees for loans and other financial products
  • Demat charges
  • Mutual fund transaction charges

3. How is the place of supply determined for banking and financial services?

• The place of supply for banking and financial services is the location of the recipient of the serviceas per their records with the bank or financial institution.

4. Do banks need to register under GST Act 2017?

• Banks with an annual turnover exceeding Rs. 20 lakhs (Rs. 40 lakhs in special category states) need to register under GST Act 2017. They can claim input tax credit on the GST paid on goods and services they purchase.

5. Where can I find more information about GST regulations for banking and financial services?

• You can refer to the following resources:
  • Official website of your state GST department

6. I have a specific question about GST and my banking or financial services.

• It’s best to consult with a qualified tax professionalfor personalized advice specific to your situation. They can help you understand how GST Act 2017 applies to your specific services and ensure compliance with the regulations.

CASE LAWS

1. Search for Relevant Case Laws:

• GST Advance Rulings Database:This online database, maintained by the GST Council, contains rulings issued by various State and Central Advance Ruling Authorities pertaining to the interpretation of the GST Act 2017 You can search the database using keywords like “banking,” “financial services,” and “GST” to see if any rulings are relevant to your specific case.
• Law portals:Online legal portals like Taxscan, VakilNo1, and Bar & Bench provide access to legal judgments and orders, including those related to GST Act 2017. Use their search features to find cases related to specific banking or financial services or broader issues like fee determination or service classification.
• Official websites of government departments:Websites of the Central Board of Indirect Taxes & Customs (CBIC) and state GST departments sometimes publish summaries of important case laws or rulings related to banking and financial services.

2. Consider Relevant Sections of the GST Act 2017and Notifications:

• Section 26 of the GST Act 2017 defines “services”: Broadly encompassing any activity other than providing goods. Understanding how your specific banking or financial service fits into this definition could be helpful.
• Schedule II of the GST Act 2017 lists various taxable services: While not always explicit for specific banking services, it includes broad categories like “management consulting services” or “financial consultancy services” that might be relevant depending on the nature of your service.
• GST notifications issued by the CBIC: These notifications often clarify the taxability of specific services or transactions within the broad categories mentioned in the Act. Search for notifications specific to banking and financial services on the CBIC website.

3. Additional Resources:

• Circulars and clarifications issued by the CBIC: These documents provide interpretations and clarifications on specific provisions of the GST Act 2017 relevant to banking and financial services. Search for them using relevant keywords on the CBIC website.
• Professional bodies and industry associations: The Indian Banks’ Association (IBA) or other relevant bodies might have published guidance or resources on the GST implications of specific banking services.