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GST Council Considers 18 Percent Tax Exemption on Bank Inter-Branch Fund Transfers
M
Moneycontrol•07-10-2026, 19:09
GST Council Considers 18 Percent Tax Exemption on Bank Inter-Branch Fund Transfers
- •The GST Council meeting on October 8 may recommend exempting internal fund transfers between bank branches from the current 18 percent GST by classifying them as interest.
- •Tax authorities previously viewed internal administrative margins as service charges, while banks argued it is merely an internal risk-management tool known as Fund Transfer Pricing.
- •The GST Council is also likely to scrap the tax exemption on precious metal imports by banks to align their treatment with the India International Bullion Exchange.
- •Banks importing precious metals would pay a 3 percent upfront IGST, which they can fully claim back as an input tax credit when supplying to domestic jewellers.
Key Questions Answered
The GST Council may recommend exempting internal fund transfers between bank branches from the current 18 percent GST by classifying internal administrative charges or notional interest as interest, which attracts nil tax.
Tax authorities argue that when treasury operations reallocate funds internally, the notional interest or administrative margin charged between branches acts as a commercial service charge provided by the central treasury.
Banks will pay a 3 percent upfront Integrated GST on gold, silver, and platinum imports to align with bullion exchange rules, but this payment will not be an extra cost because banks can claim it back fully as input tax credit.
