The Indian Banks’ Association is planning to lobby the government against an arbitrary tax notice which seeks to extract as much as Rs 40,000 crore from the country’s banks. 

In a notice served earlier this month, all banks were asked to pay service tax, penalties and interest on free services offered to customers. ET was the first to report the move in its April 24 edition. The demand is retrospective with a 12% service tax claimed since 2012, 18% interest on the amount and a 100% penalty. 

“The association has already met once on the issue and has been empowered to take it up with the government,” State Bank of India’s chief financial officer Anshula Kant told ET. “The notice imputes a value to every free service rendered by the bank which is not possible. Besides, they also want to do it retrospectively, which is difficult to say the least.” 

The notice has come as a bolt from the blue for an industry already reeling under an enormous amount of bad loans. Banks’ financials are so shaky that even the regulator eased norms for provisioning for some losses.  #casansaar (Source - ET)