Various services offered by banks come at a cost, although the charges have been kept low in the larger interest of customers.
The officials of the Central Board of Indirect Taxes and Customs (CBIC) earlier had clarified that there won’t be any levy of GST on free banking services such as ATM withdrawals, checkbook issuance, additional credit cards or ATM usage. However, various services offered by banks come at a cost, although the charges have been kept low in the larger interest of customers (percentage varies from bank to bank). For instance, transactions like late payment charges on outstanding bills of credit cards, charges for cheque bounce, cardless cash withdrawal, cash deposit, and money transfers (NEFT, RTGS) attracts GST.
Here are 5 banking transactions on which GST is levied:
1. Late payment charges on credit card
Late payment of dues on credit card outstanding is chargeable to GST. So, if you delay your credit card payments and banks levy charges on it, you will be required to pay GST on those charges.
2. Default in loan payments
The additional interest paid on default in loan payment just got bigger. If you get charged with the additional interest for defaulting in the payment of loan installments, know that you will also be liable to GST.
3. Cheque bounce charges
The Authority Advanced Ruling (AAR) in Maharastra has ruled that customers will be liable to pay GST to the bank along with the charges, in case their cheque bounces. So, if you want to avoid such charges, then ensure that your cheque never bounces.
4. Cardless Cash withdrawal and deposits at ATMs
In case you make a cardless cash withdrawal at ATMs, you will be charged an additional fee along with GST. For instance, SBI ATM transactions charge Rs 22 and GST.
Also, if your transactions are declined due to insufficient balance, you will be charged Rs 20 and GST. Similarly, if you transact beyond the 3 free monthly cash deposits, you will be charged Rs 50 along with GST per transaction.
5. Life insurance policies issued to NRIs
The life insurance policies issued to non-resident Indians (NRIs) attract GST. They are taxed because the premium is received through Non-Resident External Account, and since payments are made in Indian rupees and not in convertible foreign exchange.