GST Uncertainty Hits Banking Sector's Brand Use

Posted on    16 September 2023

The issue of the applicability of Goods and Services Tax (GST) on the use of a common brand name by all branches and subsidiaries of a bank has created uncertainty in the banking sector.


Here's a breakdown of the situation

  • GST Notices: Certain banks have started receiving GST notices related to the use of their brand by various branches and subsidiaries. These notices likely indicate that the tax department is looking into the matter and assessing whether GST should be applicable in such cases.
  • Authority for Advanced Rulings (AAR) Orders: The development is influenced by orders issued by the Authority for Advanced Rulings (AAR) in states like Tamil Nadu, Maharashtra, and Karnataka. These orders specify that each entity within a bank that has a separate GST number should be considered a distinct entity for tax purposes. This means that different branches and subsidiaries may be treated as separate entities for GST purposes.
  • Tax Department's Opinion: According to the tax department, the use of a common brand name by different entities within a bank could be considered a free service provided to related parties. As per their opinion, such services are subject to GST. If this interpretation is upheld, banks would need to determine the value of these services and apply GST accordingly.
  • Finance Ministry's Response: It's mentioned that an email seeking comments from the finance ministry remained unanswered, indicating that there has been no official response or clarification from the government on this matter.

In summary, the issue revolves around whether the use of a common brand name by various entities within a bank should be considered a taxable service under GST. The outcome of this situation will likely depend on further clarifications, legal interpretations, or potential regulatory changes. Banks may need to assess their practices and prepare for potential GST implications if the tax department's position is upheld.

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