The government may be looking at relaxing some rules in the goods and services tax (GST) framework that could make life little easier for banks NBFCs and insurance companies, people in the know said.
In the revised model law set to be released in the first week of October, two main changes-single registration and centralised audit-may be announced for banks, NBFCs and the insurance companies, a person close to the development said. “While it has not been finalised how exactly would the government go about it, broadly there seems to be a consensus that banks, especially large ones, would find it very tough under GST,“ he said.
Under current GST framework banking and financial companies will have to register all their branches in a state separately, and treat them as separate entity for GST. This is set to make registering and then calculating GST in each transaction in each branch, complicated.
A centralised registration would mean the bank would be registered with a central agency, and a separate agency would audit it. This agency would audit the transactions where revenues would be pooled, analysed a GST be levied thereafter and then distributed to the states as per the calculation and where the transaction occurred. The centralised auditor, and not the banks, NBFCs and insurance companies, would be responsible to disseminate the tax to the states, saving a lot of headache, say experts.
Industry trackers say that currently under the GST framework the burden of compliance for banks, NBFCs and insurance companies, especially with a pan India footprint would be significant as they would be required to comply separately in every state.
“Most banks and other financial companies would be required to map and measure internal transactions between their branches and pay taxes on such self-supplies under GST. This may create a risk of tax litigation given the complex products and services offered by the in dustry and manner in which taxing provisions have currently been framed,“ said Sameer Gupta, EY Financial Services tax leader.
For many banks some of the services in cluding home loans and managing demat account are centralised, which would change. Under GST, this would not be possible, as the services used in every state and revenue earned from that would attract tax in that jurisdiction only. Banks will have to look at each and every transaction and will have to have different registration for branches in different districts and states. Additionally, some of the services given by one branch in a state to another in a separate state may be taxed under GST.
This has created a nightmare for the banks and other financial companies as the compliance cost is set to go up. – www.economictimes.indiatimes.com [09-09-2016]