GST on brand name usage baffles banks

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GST) on the use of a common brand name of the bank by all its branches and subsidiaries, said two people privy to the development. Certain lenders have started receiving GST notices regarding the use of the brand by the bank branches and subsidiaries, people cited above said. The development follows several orders by the Authority for Advanced Rulings (AAR) of Tamil Nadu, Maharashtra, and Karnataka specifying that each entity within a bank with a separate GST number will be considered a distinct entity for tax purposes.

The tax department is of the opinion that it constitutes free service offered to related parties, hence, is subject to GST. If this is recognized as a service, banks will be required to arrive at a value regarding the cost of such services and GST will be applicable on such cost. An email sent to the finance ministry seeking comments, remained unanswered.

“Legal fiction created under the law to treat branch office in various states as a distinct person for GST was to ensure that credit belonging to a particular state is passed on to that state," said Pratik Jain, regional managing partner (North), tax and regulatory services at Price Waterhouse & Co. “Using a common brand by different branches is the manner in which business is conducted and the intent is not to offer a service from one office to the other. The GST Council should examine the issue and clarify on it to avoid prolonged litigation," he added.

Even the use of brand name of banks by group companies is a grey area , said experts. All big Indian banks have subsidiaries for mutual funds, insurance, and other sectors, which also use the brand name. “In the case of banks, where the logo or brand is used by their group companies, it is an