ITC ON BANK CHARGES

Applicability of GST on Bank Charges

Banks offer various services to their clients, such as processing loans, custodian services, RTGS/NEFT payments, and foreign exchange remittance services.These service fees, including bank charges, fall under the GST scope and are eligible for ITC if used for business purposes.
However, since these charges are not explicitly listed on the bank statement, taxpayers often neglect to claim ITC.

Exemptions and Place of Supply

Some financial services are exempt from GST, as specified in Notification No. 12/2017 – Central Tax (Rate). These include credit card services, interest on deposits, services by the Reserve Bank of India, and payment and settlement services.
The place of supply for bank services depends on the customer’s location. If an Indian customer receives services from a foreign bank, the place of supply depends on the bank’s location. Charges for such services are not subject to GST.

Admission of ITC on bank charges

Under the GST, any expense, except those mentioned under section 17(5) of the CGST Act – incurred while conducting business and for selling taxable goods or services may be adjusted as input tax credit and therefore can claim ITC on bank charges because section 17(5) of the CGST Act does not prohibit them.

What are the conditions for taking ITC

 Following conditions are to be fulfilled for taking input tax credit in accordance with section 16 of CGST Act:

• You must possess tax invoice/ debit note or any other tax paying document
• Goods or services are actually received by you
• The tax has been paid to the Government either by cash or ITC by the bank on such bank charges
• Furnishing of return under section 39 of the CGST Act

Time Limit for Claiming GST Input Tax Credit

Businesses can claim GST Input Tax Credit on bank charges until:

• The date of furnishing the annual return, or
• The November 30 of the year following the relevant financial year.

Can we take ITC for GST on bank charges as bank does not issue a tax invoice for such charges?

•  Since, banks do not issue a tax invoice and bank charges are mentioned in the bank statement only, a valid question arises as to how can we take ITC in absence of tax invoice.
• You need not worry on this issue as the bank statement received by the taxpayer is accepted as a valid document to claim ITC for GST on bank charges. This has also been clarified by CBIC.
• If the bank statement shows bifurcation of GST separately from bank charges, there will be no computation problems for ITC. However, if GST is not shown separately, you may approach branch of your bank to obtain a consolidated statement of charges in your account also.

Is it necessary to intimate GST numbers to bank for obtaining ITC on bank charges?

Yes, If you want to claim ITC for GST on bank charges, you should intimate your GST registration numbers to your bank so that such ITC is correctly reflected in GSTR-2A on the basis of GST return filed by the bank.

 

From,
Krishnakant Jakhotia
Mobile No :-9422507911
Email Id :- taxtalknew@gmail.com