Bajaj Finance Accused of ₹341 Crore GST Evasion

9 Aug 2024 , 08:53 AM

The DGGI has issued a show cause notice to Bajaj Finance for alleged tax evasion of ₹341 crore. The agency that probes GST fraud accused Bajaj Finance of incorrectly categorising a service charge as an interest charge in an August 3 notice that ET reported.

The corporation faces a 100% penalty for alleged ₹341 crore tax evasion from June 2022 to March 2024, ₹150 crore interest, and ₹16 lakh daily interest till payment is completed.

This adds up to ₹850 crore. “Intelligence collected reveals that Bajaj Finance Ltd is evading GST by wrongly treating services/processing charges as interest to avail the benefit of exemption provided under central tax rules,” according to the 160-page summons.

Bajaj Finance, India’s largest consumer finance NBFC with ₹3.54 lakh crore assets under management, charges ‘upfront interest’ to customers who use its loans to buy things in stores. The DGGI maintains that the upfront interest constitutes a taxable processing fee or service charge. However, it is shown as an interest charge, which is not taxable.

“The taxpayer has failed to correctly self-assess the tax payable on the upfront interest and pay the liability thereof and file the GST returns accordingly,” according to the notification. GST officials in Kerala launched the probe following an examination of a retail establishment in Kozhikode in August 2022. They looked into the details of consumer loans granted by Bajaj Finance to customers at a myG retail outlet in Kerala.

“Verification of the same revealed that the ‘upfront interest’ was a fixed amount collected irrespective of the loan amount disbursed much like the ‘service charge’ on which GST is being paid,” according to the notice of cause.

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