SRINAGAR: The High Court of Jammu Kashmir and Ladakh has granted an interim stay on the recovery of a Rs 16,261 crore demand and penalty under the Goods and Services Tax (GST) regime against Jammu and Kashmir Bank.
The relief was granted after the bank filed a writ petition challenging the demand notice issued by the Additional cum Joint Commissioner, Central GST.
Represented by Advocate Tasaduq H Khawaja, the bank argued that the demand arose from a misinterpretation of its internal financial practices. It submitted that the bank operates as a single legal entity registered under both Central GST and J&K GST Acts, with its functioning regulated by the Reserve Bank of India (RBI).
The petitioner said that funds moved between the bank’s branches and corporate office under a Transfer Pricing Mechanism (TPM) constitute internal accounting measures and do not qualify as taxable transactions.
According to the petition, the bank collects deposits through its branches and allocates funds for lending within the same structure. It earns interest on loans and pays interest to depositors. These internal transactions, it claimed, are not conducted between distinct entities and do not fall under the definition of taxable supplies under the GST Act.
The bank maintained that interest earned is exempt from tax and that such fund movements are neither goods nor services as defined under GST. It also stated that it has consistently filed GST returns declaring nil liability on these transactions.
The petition referred to RBI guidelines issued in 1999 on risk and fund management, stating that TPM is widely used across the Indian banking sector. The petitioner argued that the demand and penalty were based on a flawed understanding of these financial procedures.
Advocate T M Shamshi appeared for the Union Government and sought time to file a response.
A division bench comprising Justice Rajnesh Oswal and Justice Mohammad Yousuf Wani noted that the case raised substantial legal questions and granted an interim stay on the recovery process. The matter has been listed for the next hearing on May 7, 2025. (KNO)
