AMB Charges Including GST

Every bank requires its account holders to maintain a certain balance in their account during a month. This is known as the average monthly balance. If the customer fails to maintain the required balance, AMB charges incl GST are charged to the customer. Being aware of it can help you avoid these charges. This article explains all about AMB charges, and their taxation under GST. 

What are AMB Charges and Parties Involved?

Average Monthly Balance (AMB) is the average balance that a bank requires a customer to maintain in their savings or current account over a specific period, typically a month or a quarter.

AMB charges are levied by the bank towards failure of account holders to maintain the AMB in their accounts. It may vary depending on the bank, account type, and minimum balance requirement.

For example, if the minimum average balance requirement for a savings account is Rs.10,000, and the actual average balance maintained by the customer during a month is Rs.8,000, the shortfall is Rs.2,000. If the bank charges 1% of the shortfall as AMB charges, the customer will be charged Rs.20 as AMB fees.

AMB transactions in banks involve two parties - the account holder and the bank. The bank sets the minimum average balance requirement for each type of account, and the account holder is responsible for maintaining the required balance.

Customers are charged tax on top of fees by the bank. These charges can be easily avoided if you monitor your account regularly and make the necessary withdrawals and deposits to ensure that there is enough money to maintain the average balance.

Taxation of AMB Charges Under GST 

As per the CGST law, AMB charges are considered supply of services from the bank to the customer and therefore attract GST. The GST on all banking services is charged at 18%. This means that the total amount deducted by the bank for non-maintenance of the average monthly balance consists of AMB charges incl GST. 

ITC Availability on GST Paid on AMB Charges 

Input Tax Credit (ITC) availability on GST paid on AMB (Average Monthly Balance) charges in India depends on the nature of the transaction and the registration status of the recipient.

For Individuals:

As per the GST law, individuals are ineligible to claim the input tax credit on GST paid on AMB charges. This is because AMB charges are considered to be banking service charge, which is exempt from GST. Therefore, individuals cannot claim any input tax credit on the GST paid on AMB charges.

For Businesses/Corporates:

If a business is registered under GST, it can claim the input tax credit on GST paid on AMB charges if it uses the bank account for business purposes. This is because the AMB charges incurred by businesses are considered as an expense for the business and are eligible for input tax credit under GST. However, if the bank account is used for personal purposes, the GST paid on AMB charges cannot be claimed as an input tax credit.

Also, you can only claim the input tax credit on GST paid on AMB charges if the bank provides a tax invoice for the same or any other document in lieu of a tax invoice, which clearly mentions the GST paid on the AMB charges.