GST alert! Paying more for banking services but not getting refund? Here's the reason

Banks generally charge GST on all kind of service fees. For example, non-maintenance of minimum balance, foreign currency markup fees etc. Whenever these charges are levied, the service tax is also levied and the customer has to pay such service tax as well. When there is a refund of such service charges by the bank to the customer, either partial refund or full refund, banks generally do not refund the service tax (GST amount).

It has been observed that some banks,  refund GST charged on service fees when they make the reversal of their service charges. However, some banks do not refund this GST when they make the reversal of their service charges. There is a reason as to why the banks do so. 

CA Rahul Bansal of Sunil Suresh and Associates explains that the banks charge the GST on the various kinds of services like non-maintenance of minimum balance, foreign currency markup fees etc. But on the refund of such charges by the bank, the GST amount is not refunded due to at least two reasons. 

First, banks have already paid the GST amount to the government and for the reversal of such amount they have to make ensure that the receiver of supply (account holder) have not taken the input credit. For this, there is a need of the debit note from the customer, which is not received by the bank and therefore the GST amount is not refunded.

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Second, in other cases, if the bank is reversing the GST amount also then the account holder is either not registered in GST or the bank has still not paid the GST to the government.