February 5, 2025 | Mumbai
Jammu & Kashmir Bank Limited (NSE: J&KBANK, BSE: 532209) has disclosed that it has received a Goods and Services Tax (GST) demand notice from the Joint Commissioner, Central GST Commissionerate, Jammu, amounting to ₹8,130.66 crore in tax liability, along with an equal penalty of ₹8,130.66 crore, totaling approximately ₹16,261.32 crore.Key Highlights of the GST Demand:
| Particulars | Details |
|---|---|
| Authority Issuing Demand | Joint Commissioner, Central GST Commissionerate, Jammu |
| Date of Demand Notice | February 4, 2025 |
| GST Liability | ₹8,130.66 crore |
| Penalty Imposed | ₹8,130.66 crore |
| Total Demand | ₹16,261.32 crore |
| Period Covered | July 8, 2017 – March 31, 2020 |
| Nature of Allegation | Interest receivable under Transfer Pricing Mechanism (TPM) between Corporate Headquarters and Branches treated as financial services and subject to GST |
| Impact on Financials | No material impact expected; legal recourse initiated |
Details of the GST Dispute
The Central GST Commissionerate, Jammu, has raised a tax demand over the Transfer Pricing Mechanism (TPM) adopted by the bank, which involves internal fund transfers between different business units. The tax authorities have categorized this mechanism as a financial service subject to GST, leading to the demand.However, J&K Bank has strongly contested this claim, stating that:
- TPM is a standard banking practice followed by all banks in India as per RBI guidelines dated October 7, 1999, which established fund transfer mechanisms to support Asset-Liability Management.
- The mechanism is purely internal and does not constitute a taxable financial service under GST law.
- The demand order is believed to be without legal merit and is expected to be set aside by an appropriate court.
Legal Recourse & Expected Financial Impact
J&K Bank has initiated legal proceedings against the demand notice and has sought expert opinions, concluding that the demand lacks legal justification. The bank emphasized that:- The demand is unlikely to impact its financials, operations, or overall business.
- It will continue operating normally while the case progresses in court.