Equitas Small Finance Bank has received a show-cause notice from the Tamil Nadu Goods and Services Tax (GST) department proposing an aggregate demand of Rs 533.81 crore for the financial year 2022-23.
In a regulatory filing on Tuesday, the bank said that it received Form GST DRC-01 along with the show-cause notice (SCN) on September 21, issued by the Deputy Commissioner (ST), Central-III Zone, Commercial Taxes Department, Government of Tamil Nadu.
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The proposed demand comprises Rs 485.18 crore in tax, Rs 11.11 lakh in interest and Rs 48.52 crore in penalty.
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A significant portion of the proposed tax demand relates to the GST authority's proposed disallowance of exemption on turnover. The bank said Rs 479.33 crore of the proposed tax demand substantially relates to interest income earned from loans and advances.
Equitas Small Finance Bank said its preliminary assessment is that interest or discount earned on deposits, loans and advances is specifically exempt from GST under Entry 27(a) of Notification No. 12/2017-Central Tax (Rate), issued under the Central Goods and Services Tax Act, 2017, except interest associated with credit card services.
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The bank said it has consistently followed this treatment and that assessments for prior years were completed without treating the relevant exempt interest income as taxable turnover.
The SCN also raises issues relating to short payment of tax on outward supplies, alleged suppressed turnover, short payment under reverse charge, credit notes, inter-State branch transfers, rate differences, excess input tax credit (ITC) and ineligible ITC.
Equitas said it has substantive factual and legal grounds to contest the matters raised in the notice and will submit a detailed response along with relevant reconciliations and supporting documents within the prescribed timeline.
The bank emphasised that the notice is only at the show-cause stage and does not constitute a final adjudication or crystallised liability.
It added that the financial impact, if any, will depend on the outcome of the proceedings and cannot be determined at this stage.
At 1:20 PM, Equitas Small Finance Bank share price was trading 0.19% lower at Rs 72.30 apiece on the BSE.
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