Bombay HC Gives Interim Relief to Bank of Baroda in Rs150 Crore GST Demand on Monthly Average Balance Charges
Moneylife Digital Team 17 April 2024
Granting an interim relief to Bank of Baroda (BoB), the Bombay High Court (HC) restrained the tax authorities from taking any coercive recovery action against the public sector bank (PSB). The case is related to a show-cause notice (SCN) for Rs150 crore goods and services tax (GST) on charges collected by BoB from customers for not maintaining a minimum average balance (MAB) in their accounts.
 
The bench of justice GS Kulkarni and justice Firdosh Phiroze Pooniwalla agreed to defer the hearing against the SCN and listed the matter after two weeks after directing the tax authorities to file its reply.
 
BoB has filed the petition against an order confirming the GST demand of Rs60 crore and an SCN proposing a demand of over Rs90 crore for services rendered to a specific category of customers against the MAB commitment.
 
During the hearing, the tax authority justified the demand, stating that BoB offers these services in exchange for non-monetary consideration committed by its customers to maintain a minimum balance.
 
However, BoB argued that the MAB cannot be equated with the consideration as understood under the GST law and, without a clear monetary consideration, the tax authority cannot assign value to these services.
 
BoB also cited similar petitions filed by various banks through the Indian Bank's Association (IBA), challenging SCNs issued by the directorate general of GST intelligence (DGGI) proposing service tax on services offered in exchange for MAB commitments. These cases are currently pending before the Delhi HC.
 
Last month, the Delhi HC had also granted interim relief to ICICI Bank against an SCN for imposing GST of about Rs600 crore on commitment to maintain MAB in bank accounts from April 2018 to March 2019.
 
Earlier in July 2019, the Delhi HC admitted a batch of petitions filed by 13 banks challenging SCNs seeking to levy service tax of Rs38,000 crore on commitment to maintain MAB. The SCNs were issued for "treating the commitment of customers to maintain MAB in bank accounts as a consideration for banking facilities provided free."
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