‘Cut And Pay Scheme’ For Tax Evasion? Yes Bank Evaded Rs 330 Million, Claims GST Authority 

A whopping Rs 330 million is alleged to have been evaded by private bank, YES Bank, from GST authority through ‘Cut and Pay’ scheme, reports The Business Standard.

Anti-evasion wing of the Goods and Service tax in Mumbai alleged undervaluation of service charges paid for Direct Money Transfer services via banking correspondents (BC) and agents. It also alleges the bank violated several provisions of the Central GST Act of 2017 and the Bank-BC guidelines of the Reserve Bank of India (RBI).

Banks are allowed to employ BCs for helping walk-in customers complete a DMT and they can charge for the services. The RBI had mandated the charges to be in the range of 1-1.5 per cent. However, the commission to such BCs could be 0.2-0.6 per cent. This service charge, though, would entirely go to the banks’ fee account and tax liabilities are discharged from the gross amount.

According to the ‘cut and pay scheme’, the entire service charge revenue is not disclosed to the tax authorities and thereby evading GST. Manpreet Arya, Additional Commissioner at the Mumbai Central GST Commissionerate, was reported saying that, even though YES Bank charged 1.5 per cent service charge for each DMT, it deposited tax of different proportions ranging 0.5-0.8 per cent by raising invoices to BCs and agents, thereby reducing the tax revenue.

Earlier this June, Axis was also reported to have followed the same method for evading tax and had to repay its dues with interest to the tax authorities.

However, YES Bank has denied the allegations and said that it has interpreted the law in the right way and its practices are consistent with the existent laws.