J&K Bank Clarifies GST on FTP; Seeks Quashing of ₹8,330 Crore Demand
J&K Bank clarifies GST treatment of its Funds Transfer Pricing (FTP) mechanism. The CBIC confirmed that notional interest under FTP is exempt from GST. This clarification aims to quash demand orders totaling ₹8,330.87 crore issued against the bank. The bank had previously obtained interim protection from the High Court.
The resolution of GST demands totaling over ₹8,330 crore has a substantial financial implication for the bank, significantly impacting its financial health and reducing potential liabilities.
The CBIC clarification validating the bank's stance on GST treatment of FTP is a positive development, likely leading to the quashing of significant demand orders.
The Jammu & Kashmir Bank Limited has provided a clarification regarding the Goods and Services Tax (GST) treatment of its Funds Transfer Pricing (FTP) mechanism. This follows two demand orders issued by GST authorities: one dated February 4, 2025, for GST liability and penalty of ₹8,130.66 crore, and another dated March 23, 2026, for ₹200.20 crore, both with applicable interest.
The bank had challenged these demands before the Hon'ble High Court of Jammu & Kashmir and Ladakh and secured interim protection.
In a significant development, the Central Board of Indirect Taxes and Customs (CBIC), through circular No: 266/12/2026-GST dated October 28, 2026, clarified that the notional interest recorded in the books of accounts under the FTP mechanism, which represents the cost of funds for intra-branch fund transfers, is covered by the definition of "interest" and is exempt from GST under Notification No. 12/2017 - Central Tax (Rate) dated June 28, 2017.
The bank has consistently maintained this position, and the CBIC's clarification validates its stance. Consequently, the bank intends to pursue the quashing of the aforementioned demand orders with the appropriate authorities.
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The Jammu & Kashmir Bank Limited filed this with the NSE as a statutory disclosure, categorised under regulatory impact. It is a primary document, not a recommendation, and the desk marks it high impact, which is the band that most often changes something.
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See the model portfoliosA plain-language summary of a public exchange filing by The Jammu & Kashmir Bank Limited. Read the original for the full detail.