PSBs under DGGSTI scanner: SBI denies any irregularity in availment of Cenvat credit of indirect taxes

The Directorate General of Goods and Services Tax Intelligence (DGGSTI) issued letters to SBI, PNB, Canara Bank and Syndicate Bank as a part of investigation into the alleged irregularities in availment of Cenvat credit pertaining to ATM transactions.

State Bank of India branch in Chennai. Photo: IANS

In the wake reports that the Directorate General of Goods and Services Tax Intelligence (DGGSTI) has issued letters to four Public Sector banks (PSBs), including largest lender State Bank of India, the latter has stated that it took eligible cenvat credit of indirect taxes paid to ATM service providers and denied any irregularity. According to Economic Times report, the revenue department’s intelligence unit launched an investigation into alleged collusion between select banks and ATM service providers to avoid payment of value added tax (VAT) and wrongful claim of tax credit.

Apart from SBI, other banks reportedly fraud-trapped included Punjab National Bank (PNB), Canara Bank and Syndicate Bank. They were not the only one under the DGGSTI radar, but some of their ATM service providers such as NCR, AGS Transact and Tata Payments were under scanner.

The ET report, citing copy of DGGSTI letter, said, “In connection to the investigations into alleged irregularities in availment of cenvat credit pertaining to ATM transactions by certain banks, please provide details in respect of Syndicate Bank, Canara Bank, Punjab National Bank and State Bank of India and erstwhile associate banks of State Bank of India.”

When ZeeBusiness contacted, the SBI spokesperson said, “The Bank has taken eligible Cenvat credit of indirect taxes paid to ATM service providers and there is no irregularity in indirect tax payments and Cenvat credit availed by us on service tax paid to ATM service provider.”

“DGGSTI, in normal course, initiates enquiries on various issues from time to time. Bank fully co-operates DGGSTI by providing the necessary information/document required by them. Such enquiry does not necessarily indicate any irregularity on the part of the Bank and many a times such enquiries are conducted across the sector,” said the spokesperson, adding “We have not received any notice for any demand of indirect tax on Cenvat credit of service tax paid to ATM service provider. We shall deal with the same in accordance with applicable legal provisions as and when we receive the notice.”

Other three above mentioned PSBs, however, are yet to provide any information in this matter.

According to Revenue department, three kinds of information were sought; firstly, details of different types of services provided by the banks, secondly, copies of agreement and other document governing terms and conditions of outsourcing of ATMs, and lastly, annual reports between financial year FY14 and FY17.

It may be added that similar information was asked by many banks, and most of them submitted the details in the month of February itself.

The DGGSTI, earlier known as Directorate General of Central Excise Intelligence (DGCEI), is the apex intelligence organisation, functioning under the Central Board of Excise & Customs (CBEC), Department of Revenue, Ministry of Finance, entrusted with the task of detection of cases of evasion in regards to GST and indirect taxes with effect from July 01, 2017 - when GST was implemented in India.

Central Value Added Tax (CENVAT) was introduced in 2004, with an aim to reduce tax burden faced by a consumer when he/she purchases a product, offering a clear picture of tax liability at various stages of production.

As per the guidelines of CENVAT, it offers clarity with regards to credit to both manufacturers and service providers, ensuring that all parties are aware about their duties, with no additional drain on any one segment, be it a manufacturer or a customer, eliminating double taxation and keeping the entire chain simple and clean.

Usually, most banks either buy their ATMs or outsource it to service providers. Reportedly, the DGGSTI is investigating how many of the contracts between the ATM service providers and the banks were “disguised contracts” and how many of those were “fraudulent contracts”.

The banks sign multiple types of contracts with ATM providers. Following the clarification, SBI emerged as the top performers on Indian benchmark indices, as its share price closed at Rs 253.85 per piece above 3.04%.

Meanwhile, other banks too saw positive ending in Tuesday's trading session, with PNB share price closing at Rs 99.25 per piece up 3.66%, while Syndicate Bank finishing at Rs 56.95 per piece higher by 1.70%. However, Canara Bank saw negative ending of Rs 268.55 per piece down by 0.48% on the BSE.