GST

PROJECT
REPORT
 A REPORT
ON
“Banking Sector”
ACKNOWLEDGEMENT
It gives us immense pleasure to present this project report on “Banking Sector”.
No work can be carried out without the help and guidance of various people. We
are happy to take this opportunity to express gratitude to those who have been
helpful to us in completing this project report.
We thank Mr. Anand- Faculty, without his guidance it would not have been
possible for us to complete this project report.

TABLE OF CONTENTS
1. Introduction to allocated sector with respect to GST
2. GST Council Powers and Functions - Special Features of
Composition Levy
3. Example Invoices showing elements of different Goods
and Services
4. Determining the usage of Input Tax Credit, RCM
and Payment/Refunds
 BANKING SECTOR

1. Introduction to allocated sector with respect to GST

a) Brief introduction on the nature and unique features of the Banking Sector
The banking sector is an integral part of any economy, as it provides financial services to individuals,
businesses, and governments. Banks serve as intermediaries between depositors and borrowers, accepting
deposits and using those funds to make loans and investments.
One unique feature of the banking sector is its ability to create money through the process of fractional
reserve banking. Banks can lend out a portion of the deposits they receive, while keeping a fraction of those
deposits as reserves. This allows banks to increase the money supply in the economy, as loans are spent and
deposited into other accounts, creating a multiplier effect.
Another key feature of the banking sector is its role in facilitating transactions through payment systems
such as wire transfers, electronic funds transfers, and credit and debit card transactions. Banks also provide a
range of other financial services, including wealth management, investment banking, and insurance.
The banking sector is one of the largest services sectors in India. It contributes 7.7 percentage to the GDP of
the nation.
b) List of leading companies in India in the Banking Sector and the amounts of GST that they pay out
The banking sector in India is dominated by several large public and private sector banks. Some of the leading
banks in India include:
1. State Bank of India (SBI)
2. HDFC Bank
3. ICICI Bank
4. Axis Bank
5. Punjab National Bank (PNB)
6. Bank of Baroda
7. Canara Bank
8. Union Bank of India
9. Kotak Mahindra Bank
10. IDBI Bank
However, like all businesses in India, banks are required to collect and remit Goods and Services Tax (GST)
to the government on the sale of its goods and services. The amount of GST paid by these banks would
depend on its revenue, the types of goods and services it provides, and other factors.
Banks and financial institutions are subject to GST at a rate of 18% on most services they provide. would
likely pay GST at this rate on most of its services, such as banking fees, loan processing fees, and other
financial services.

c) Unique concessions or benefits the Banking Sector enjoy with respect to GST
In India, the banking sector is subject to GST, and banks are required to register themselves, file returns, and
pay taxes regularly. However, certain financial services provided by banks are exempted from GST.
The GST exemptions in the banking industry are provided under Notification No. 12/2017-Central Tax
(Rate) dated 28th June 2017. The notification specifies the following financial services that are exempted
from GST:
 Interest on Deposits: Banks earn interest on the deposits they receive from their customers. This
interest income is exempted from GST.
 Loans and Advances: Banks provide loans and advances to their customers, and the interest charged
on these loans is exempted from GST.
 Credit Card Services: Banks provide credit card services to their customers, and the fees and
charges levied for these services are exempted from GST.
 Payment and Settlement Services: Banks provide payment and settlement services such as NEFT,
RTGS, and IMPS. These services are exempted from GST.
 Services provided to Basic Saving Bank Deposit (BSBD) Account Holders: Banks are required to
provide certain services free of cost to BSBD account holders. These services are exempted from
GST.
 Services provided to Jan Dhan Account Holders: Banks are required to provide certain services
free of cost to Jan Dhan account holders. These services are exempted from GST.
 Services provided by Banking Correspondents: Banking correspondents provide certain services
on behalf of banks in rural areas. These services are exempted from GST.
 Services provided to the Reserve Bank of India (RBI):
Banks offer various services to the RBI, such as currency management and payment and settlement
services. These services are exempted from GST.
The GST exemptions and concessions provided to the banking industry are aimed at promoting growth and
development in the sector. By exempting certain aspects of the tax, the government hopes to encourage
banks to lend more and provide better services to customers.
d) Other relevant points of Banking Sector
Among the services provided by Banks, financial services such as fund based, fee-based and insurance
services have seen key shifts from the previous scenario. Some of the major challenges that inhibit their
adoption of the regime are the number of branches spread across states, which makes registration process a
hurdle, input tax credit procedures, issues relating to assessment and adjudication. With GST, services
attract 18% GST. This rate is higher by 3% from the previous service tax rate of 15%.
This makes many of banking services attract higher service tax including debit card, fund transfer, ATM
withdrawal beyond the number of free services, home loan processing fee, locker rentals, issuance of cheque
books. Another point to note is that these days banks also deal in commodities such as gold / silver where a
concessional GST rate is expected to be applicable.
 2. GST Council powers, functions. Composition Levy,
Registration
a) GST Council Structure; GST Council Powers and Functions of Banking Sector
The structure and powers of the GST Council apply to all sectors of the economy, including the banking
sector. However, there are some specific issues related to the banking sector that the GST Council has
addressed through its recommendations. Here are some of the powers and functions of the GST Council that
apply to the banking sector:
1. Tax rates on banking services: The GST Council recommends the tax rates on banking services,
which includes services like account opening, cash deposit, withdrawal, fund transfers, and other
financial services offered by banks. Currently, banks are subject to GST at the rate of 18% on most
services they provide.
2. Input tax credit: Banks are eligible to claim input tax credit (ITC) on GST paid on their purchases of
goods and services, which includes software, office equipment, and other inputs used in their
operations. The GST Council has recommended the rules for claiming ITC by banks and has
provided clarifications on the types of inputs that are eligible for ITC.
3. Inter-branch transactions: Banks have multiple branches across the country, and they often carry out
transactions between their branches. The GST Council has provided guidelines for the valuation of
such inter-branch transactions and has recommended that GST should be levied only on the margin
between the cost of supply and the consideration paid.
4. Compliance requirements: The GST Council has recommended simplified compliance procedures for
banks, which include filing a consolidated GST return for all their branches instead of separate
returns for each branch.
Overall, the GST Council plays an important role in shaping the GST regime for the banking sector,
ensuring that the tax rates and compliance procedures are fair and reasonable. The Council's
recommendations have a significant impact on the banking sector, and banks need to ensure that they
comply with the GST laws and regulations.
b) Latest GST collection numbers with source of Banking Sector
The latest GST collection numbers are crucial for the banking sector as it directly impacts the revenue
earned by banks from GST paid by customers on various banking services. The source of the latest GST
collection figures is the Press Information Bureau (PIB) of the Government of India, which releases monthly
GST collection figures. The data is also available on the official website of the Central Board of Indirect
Taxes and Customs (CBIC). According to the latest available data from the Central Board of Indirect Taxes
and Customs (CBIC), the GST collection from the banking and financial services sector for the month of
August 2021 was Rs. 1,782 crore. This was a decrease from the previous month of July 2021, when the GST
collection from the banking and financial services sector was Rs. 1,987 crore. However, it's important to
note that the GST collection figures can fluctuate from month to month, depending on various factors such
as the level of economic activity, changes in tax rates, and other factors.
c) Meaning and understanding of Composition Scheme and its Levy of Banking Secctor
The Composition Scheme is a simplified taxation scheme under the Goods and Services Tax (GST) regime
that is designed for small businesses with a turnover of up to Rs. 1.5 crore. The scheme provides for a lower
tax rate and reduced compliance requirements for businesses that opt for it. Under the Composition Scheme,
businesses are required to pay a fixed percentage of their turnover as tax instead of the regular GST rate. The
tax rate varies depending on the type of business, and it is generally lower than the regular GST rate. In
return, businesses are required to file a quarterly return instead of the regular monthly returns. However, the
Composition Scheme is not available to all businesses. Certain businesses, including banks and financial
institutions, are not eligible for the Composition Scheme. Banks and financial institutions are required to pay
GST at the regular rate on all their supplies, including loans, deposits, and other financial services. The
rationale behind this exclusion is that banks and financial institutions provide essential services and their
turnover is generally much higher than the threshold limit of Rs. 1.5 crore. Additionally, banks and financial
institutions are subject to complex regulatory requirements, and simplified compliance procedures may not
be suitable for them.
Overall, the Composition Scheme is a useful tool for small businesses to simplify their tax compliance and
reduce their tax liability. However, banks and financial institutions are not eligible for the scheme and are
required to pay GST at the regular rate on all their supplies.
d) GST Registration types of Banking Sector
Under the Goods and Services Tax (GST) regime in India, businesses in the banking sector are required to
register for GST if their annual turnover exceeds the threshold limit of Rs. 20 lakh. GST registration is
mandatory for all businesses that engage in the supply of goods or services, and failure to register can result
in penalties and legal action.
There are two types of GST registration available for businesses in the banking sector:
1. Regular GST registration: This type of registration is suitable for businesses that engage in the
supply of taxable goods or services and are not eligible for any of the special schemes under GST.
Banks and financial institutions that do not qualify for the Composition Scheme are required to
register for GST under this category.
2. GST registration for Input Service Distributor (ISD): An Input Service Distributor is a business that
receives invoices for services received by various branches of the same organization and distributes
the input tax credit (ITC) to the respective branches. Banks and financial institutions that operate
multiple branches can opt for this type of GST registration to distribute the ITC among their
branches.
It's important to note that banks and financial institutions that are engaged in exempted supplies or supplies
that are outside the scope of GST are not required to register for GST. However, such businesses may
choose to register voluntarily to claim input tax credits on their purchases and to maintain compliance with
the GST laws.
 3. Example Invoices showing elements of Goods and Services

a) Time of Supply
Case 1: Goods: Issue of cheque book
Section 12. Time of Supply of Goods

The time of supply of goods shall be the earlier of the following dates, namely: -

(a) the date of issue of invoice by the supplier: 06-04-2023

(b) the last date on which he is required, under section 31, to issue the invoice with respect to the
supply;
Section 31: On or before removal of goods: 15-04-2023
(c) the date on which the supplier receives the payment with respect to the supply: 05-04-2023
(Not considered because no GST on advances)

Time of supply (Date of invoice): 06-04-2023

State Bank of India 5/139/A/2, Satavari Complex,

Hyderabad Road, beside Sai
GSTIN : 36AAACS8577K1ZQ Baba Theater, Shankarpalle,
Telangana 501203

INVOICE
Party Name: Abhishek Singh Date: 06-04-2023
Address: Banjara Hills, Hyderabad, Telangana Invoice No.: 001

GSTIN: 36ABDCF6846F1ZU

Particulars Qty Amount

Issue of Cheque book 1 2,000

CGST @ 9% 180

180
SGST @ 9%

Rupees Two Thousand Three Hundred and Sixty Only Total 2360

Authorized signatory
Case 2: Goods: Issue of Credit card
Section 12. Time of Supply of Goods

The time of supply of goods shall be the earlier of the following dates, namely: -

(a) the date of issue of invoice by the supplier: 13-03-2023

(b) the last date on which he is required, under section 31, to issue the invoice with respect to the
supply
Section 31: On or before delivery of goods or making available thereof to the recipient: 18-03-
2023
(c) the date on which the supplier receives the payment with respect to the supply: 13-03-2023

Time of supply (Date of invoice): 13-03-2023

State Bank of India 5/139/A/2, Satavari Complex,

Hyderabad Road, beside Sai
GSTIN: 36AAACS8577K1ZQ Baba Theater, Shankarpalle,
Telangana 501203
INVOICE

Party Name: Priya Gupta Date: 13-03-2023

Address: Kokapet, Hyderabad, Telangana Invoice No.: 002

GSTIN: 36TGDIF1646R1PE

Particulars Qty Amount

Credit Card 1 5,000

CGST @ 9% 450

450
SGST @ 9%

Rupees Five Thousand Nine Hundred Only Total 5,900

Authorized signatory
Case 3: Services: Lending loan
Section 13. Time of Supply of Services

The time of supply of services shall be the earliest of the following dates, namely:-

(a) the date of issue of invoice by the supplier, if the invoice is issued within the period prescribed under
section 31: 14-03-2023

Section 31: Date of provision of service: 03-03-2023

Date of completion of 45 days: 17-04-2023

(b) the date of receipt of payment: 03-03-2023

Time of supply (Date of invoice): 03-03-2023

State Bank of India 5/139/A/2, Satavari Complex,

Hyderabad Road, beside Sai
GSTIN: 36AAACS8577K1ZQ Baba Theater, Shankarpalle,
Telangana 501203
INVOICE

Party Name: Sanjay Reddy Date: 03-03-2023

Address: Financial District, Hyderabad, Telangana Invoice No.: 003

GSTIN: 36TFYIU1348E1GO

Particulars Qty Amount

Loan Processing Fee - 10,000

CGST @ 9% 900

900
SGST @ 9%

Rupees Eleven Thousand Eight Hundred Only Total 11,800

Authorized signatory
b) Place of Supply
Section 12 Place of supply of services where location of supplier and recipient is in India
Case-1: Location of supplier: Shankarpalle, Hyderabad, Telangana
Location of Recipient: NA
Place of supply: Telangana (CGST and SGST)

State Bank of India 5/139/A/2, Satavari Complex,

Hyderabad Road, beside Sai
GSTIN: 36AAACS8577K1ZQ Baba Theater, Shankarpalle,
Telangana 501203
INVOICE

Party Name: Ganesh Rao Date: 05-04-2023

Address: NA Invoice No.: 004
Place of supply: Telangana

GSTIN: 36TFYIU1348E1GO

Particulars Qty Amount

Charges for safe deposit locker - 9,000

CGST @ 9% 810

810
SGST @ 9%

Rupees Ten Thousand Six Hundred Twenty Only Total 10,620

Authorized signatory
Case 2: Location of supplier: Shankarpalle, Hyderabad, Telangana
Location of Recipient: Gachibowli, Telangana
Place of supply: Telangana (CGST and SGST)

State Bank of India 5/139/A/2, Satavari Complex,

Hyderabad Road, beside Sai
GSTIN: 36AAACS8577K1ZQ Baba Theater, Shankarpalle,
Telangana 501203
INVOICE

Party Name: Mahesh Reddy Date: 03-04-2023

Address: Gachibowli, Telangana Invoice No.: 005
Place of supply: Telangana

GSTIN: 36RACJL3725E1HC

Particulars Qty Amount

Bank Guarantee Charges - 4,000

CGST @ 9% 360

360
SGST @ 9%

Rupees Four Thousand Seven Hundred Twenty Only Total 4,720

Authorised signatory
Case 3: Location of supplier: Shankarpalle, Hyderabad, Telangana
Location of Recipient: Bangalore, Karnataka
Place of supply: Karnataka (IGST)

State Bank of India 5/139/A/2, Satavari Complex,

Hyderabad Road, beside Sai
GSTIN: 36AAACS8577K1ZQ Baba Theater, Shankarpalle,
Telangana 501203
INVOICE

Party Name: Dinesh Rao Date: 16-03-2023

Address: Bangalore, Karnataka Invoice No.: 006
Place of supply: Karnataka

GSTIN: 36RACJL3725E1HC

Particulars Qty Amount

Consultancy fee - 2,000

360
IGST @ 18%

Rupees Two Thousand Three Hundred Sixty Only Total 2.360

Authorised signatory
c) Value of Supply
Section 15. Value of Taxable Supply
(1) The value of a supply of goods or services or both shall be the transaction value.
(2) The value of supply shall include-
a. Incidental expenses, including commission and packing, charged by the supplier
b. Interest or late fee or penalty for delayed payment of any consideration for any supply
(3) The value of the supply shall not include any discount which is given
Case 1: Foreign currency exchange charges: 3000
Commission: 1000
Value of supply: 4000 (CGST and SGST)

State Bank of India 5/139/A/2, Satavari Complex,

Hyderabad Road, beside Sai
GSTIN: 36AAACS8577K1ZQ Baba Theater, Shankarpalle,
Telangana 501203
INVOICE

Party Name: Mukesh Singh Date: 16-03-2023

Address: Banjara hills, Telangana Invoice No.: 007

GSTIN: 36DHRXK2765L1EJ

Particulars Qty Amount

Foreign currency exchange charges - 3,000

Commission 1,000

Total value of supply 4,000

CGST @ 9% 360

SGST @ 9% 360

Rupees Four Thousand Seven Hundred Twenty Only Total 4,720

Authorised signatory
Case 2: Overdraft charges: 4000
Discount: 300
Value of supply: 3700 (CGST and SGST)

State Bank of India 5/139/A/2, Satavari Complex,

Hyderabad Road, beside Sai
GSTIN: 36AAACS8577K1ZQ Baba Theater, Shankarpalle,
Telangana 501203
INVOICE

Party Name: Sathvika Rao Date: 30-03-2023

Address: Suncity, Telangana Invoice No.: 008

GSTIN: 36WITBK6249H4KS

Particulars Qty Amount

Overdraft charges - 4,000

Discount 300

Total value of supply 3,700

CGST @ 9% 333

SGST @ 9% 333

Rupees Four Thousand Three Hundred Sixty Six Only Total 4,366
Authorised signatory
Case 3: Credit card services: 6000
Late payment charges: 300
Value of supply: 6300 (CGST and SGST)

State Bank of India 5/139/A/2, Satavari Complex,

Hyderabad Road, beside Sai
GSTIN: 36AAACS8577K1ZQ Baba Theater, Shankarpalle,
Telangana 501203
INVOICE

Party Name: Mansi kumari Date: 04-03-2023

Address: Financial district, Telangana Invoice No.: 009

GSTIN: 36DKUCA2961T3DQ

Particulars Qty Amount

Credit card services - 6,000

Late payment charges 300

Total value of supply 6,300

CGST @ 9% 540

SGST @ 9% 540

Rupees Seven Thousand Three Hundred Eighty Only Total 7,380

Authorised signatory
d) GST Rules applicable for SBI bank
Reimbursement of GST will be made only on submission of proper GST invoice as per applicable GST
provisions/Rules. The contractor should comply with the following;
 Contractor should have GST Registration Number.
 Invoice should specifically/separately disclose the amount of GST levied at applicable rate as per GST
provisions/Rules.
 In case of Correction in the bills after scrutiny, contractor should submit fresh bills for payment.
 Contractor should timely file his GST return in accordance with GST provisions to enable the bank to
claim the credit of GST paid to the contractor.

4. Determining usage of ITC, RCM and Payment/Refunds

a) Determining how the ITC are adjusted applying relevant GST rules in SBI (input to Bank)
Loan Transfer - When you make the bank to transfer your loan to other banks, then you have to pay the
transaction processing fee. This fee also attracts GST.
Late Payment Fee - When you do not pay a credit card bill on time, at that moment you have to pay late
payment charges as well. Now, you have to pay late payment charges along with GST.
ATM Transaction - When you transact more than the prescribed limit per month on ATM usage, you have
to pay approx INR 21 + 18% GST per transaction to banks. Along with this charge, you also have to pay
GST. for example, if you are a customer of a bank where the per month ATM free transaction limit is 3 to 5
and you transact more than this limit, in this case, you have to pay bank charges and GST.
New Cheque Book - The banks provide limited cheque-books free of cost, but after crossing the limit it
comes to the chargeable category. These charges on cheque book issuance and getting bank statements also
attract GST.
Closing of Bank Accounts - The State bank of India, along with most other banks in the country, has
started charging GST on the closing of bank accounts. Under the new law, GST will be charged if a person
closes his bank account within 1 year of opening it. However, if a person chooses to close his/her account
within 14 days of opening, there will be no tax charged on the service.
b) Determining how and under what situations RCM are applied
Nature of Supply (Goods / Supplier of Goods/ Services Recipient of Goods /
Services) Services
Legal Services of the An individual advocate Any business entity located
advocate including a senior advocate in the taxable territory
or firm of advocates
Director’s services (except A director of a company or a The company or a body
remuneration) body corporate corporate located in the
taxable territory
Services of insurance Agent An insurance agent Any person carrying on
insurance business, located
in the taxable territor
Services provided or A recovery agent A banking company or a
agreed to be provided by a financial institution or a non-
recovery agent to a banking financial company,
banking company or a located in the taxable
financial institution or a territory
 non-banking financial
company
Long term lease of land (30 Any person Promoter
years or more) against
consideration in the form of
upfront amount (called as
premium, salami, cost, price,
development charges or by
any other name) and/or
periodic rent for
construction of a
project
Security services Any person other than a A registered person, located
body corporate in the taxable territory

c) Determining the GST payment amounts and excess payment refund situations of SBI
Under GST the tax to be paid is mainly divided into 3 –
 IGST – To be paid when interstate supply is made (paid to center)
 CGST – To be paid when making supply within the state (paid to center)
 SGST – To be paid when making supply within the state (paid to state)
Apart from the above payments a dealer is required to make these payments –
 Tax Deducted at Source (TDS) – TDS is a mechanism by which tax is deducted by the dealer before
making the payment to the supplier
 Tax Collected at Source (TCS) – TCS is mainly for e-commerce aggregators. It means that any dealer
selling through e-commerce will receive payment after deduction of TCS @ 2%.
This provision is currently relaxed and will not be applicable to notified by the government.
 Reverse Charge – The liability of payment of tax shifts from the supplier of goods and services to the
receiver.
What is the Refund of GST on Excess Tax Paid?
In multiple situations, this may happen that taxpayers calculate the wrong Tax Amount, pay the Taxes under
wrong heads, or pay extra GST than their actual liability. In such cases, the taxpayers can claim the GST
refund of the excess tax paid. A series of steps need to be followed by the taxpayer to claim the refund on
excess tax paid. There can be multiple possibilities for this to happen. Under various circumstances, excess
GST can be erroneously paid by the Taxpayer.
The bottom line is that if the taxes paid by the taxpayer are not required due to any reason he can claim the
refund for it & he must get the excess taxes back.
d) Returns to be filed in RCM
The reverse charge mechanism (RCM) is applicable for specific services notified under the GST Act. Under
the reverse charge mechanism, the recipient has to pay tax but both the supplier and recipient must report
RCM supplies.
Under the new return filing system
The supplier has to report the summary sales subject to RCM in GST RET-1. He has to report outward RCM
supplies under Table 3D of GST RET-1 (details of supplies having no liability). There is no need to report
sales subject to RCM in GST RET-2 and GST RET-3. The recipient has to report invoice-wise purchases
attracting reverse charge in GST ANX-1. He has to report this in Table 3H of GST ANX-1 (inward supplies
attracting reverse charge).
The inward RCM supplies reported by the recipient will be auto-populated to Table 3B of GST RET-1
(details of inward supplies attracting reverse charge) from GST ANX-1. The recipient has to discharge his
liability through electronic cash ledger while filing his GST RET-1/PMT-08/RET-2/RET-3 as the case may
be. The credit on RCM purchases will be auto-populated to Table 4A of recipient’s GST RET-1 (details of
ITC based on auto-population from FORM GST ANX-1).

References
https://blog.saginfotech.com/banking-services-under-gst
https://taxguru.in/goods-and-service-tax/reverse-charge-mechanism-rcm-list-gst.html
https://cleartax.in/s/gst-payments-and-refunds
https://gsthero.com/everything-about-gst-refund-of-excess-tax-paid/#t-1620735216858
https://www.gst.gov.in/
https://cleartax.in/s/impact-of-gst-on-insurance-and-banking
https://www.legalserviceindia.com/legal/article-7861-impact-of-gst-on-banking-sector.html
https://www.legalserviceindia.com/