The intelligence arm of the indirect tax department has asked three top banks to pay full tax due on fees paid to card and payment companies based outside India from as far back as six years ago. The Director General of GST Intelligence (DGGI) has issued notices to State Bank of India, ICICI Bank and HDFC Bank for “short payment of service tax” on the money they paid to multinationals such as MasterCard, Visa and American Express. At the heart of the matter is the lack of clarity on the tax liability on the annual fees that banks pay multinationals. Banks typically deduct tax at source on such payments an amount that’s reimbursed to them and also pay service tax.
The intelligence arm’s investigations show that banks deduct about 10% at source on such payments to multinationals. However, the authorities said the banks are liable to pay tax on the gross figure the fees and the amount deducted at source. “…(it’s learnt that) your bank had short paid service tax on account of non-grossing up of TDS (tax deducted at source) in association/settlement charges made by them to their overseas service providers in respect of credit card, debit card, charge card or other payment card related services received by them in India,” reads the notice issued to a bank.
ET has reviewed the notice, which demands tax since 2012-13 from the bank. The three banks did not respond to ET’s queries seeking comment on the notices. More banks could be issued notices soon, said people aware of the matter. “While notices have been issued to three banks now, more notices will be issued in the coming weeks,” a banking official told ET.
Read more at: https://economictimes.indiatimes.com/industry/banking/finance/banking/top-banks-under-taxmans-lens-over-service-tax-issue/articleshow/68072431.cms