SBI Cards Gets GST Show Cause Notice for ₹81.93 Crore ITC
SBI Cards gets GST notice for allegedly wrongfully availing ₹81.93 crore as input tax credit (ITC). This development has stirred discussions in the financial and tax advisory space, as the case could set a precedent for large NBFCs and service providers availing substantial ITC under the CGST framework.
Why Did SBI Cards Receive a GST Show Cause Notice?
The Directorate General of GST Intelligence (DGGI) issued a show cause notice (SCN) under Section 73 of the CGST Act, 2017 after a detailed audit.
Here’s what the notice covers:
- Period of dispute: FY 2018–19 to FY 2022–23
- Claimed ITC: ₹81.93 crore
- Alleged violations:
- Irregular ITC claims on ineligible inward supplies
- Potential non-compliance with Section 16(2) of the CGST Act
- Suspected misuse of Rule 86B (restrictions on using ITC beyond 99% of output liability)
Legal Framework: ITC under GST
The Input Tax Credit mechanism is governed by:
- Section 16 of CGST Act: Conditions to claim ITC
- Rule 36 & 86B of CGST Rules: Documentation and usage limits
- Section 73: Recovery of tax not paid or short paid without fraud
Key Conditions to Avail ITC (Section 16)
- Possession of valid tax invoice
- Receipt of goods or services
- Tax actually paid to the government by supplier
- Timely filing of GSTR-3B
If any of these are not met, ITC may be denied or reversed.
How Rule 86B May Be Involved
Rule 86B imposes a restriction:
If taxable turnover exceeds ₹50 lakh/month, taxpayers can use only 99% of ITC to pay output tax. Remaining 1% must be paid in cash.
Authorities suspect that SBI Cards may have over-relied on ITC, possibly breaching this rule, or misclassified inward supplies.
Expert Insight: What Tax Professionals Should Watch Out For
“Many large service providers assume input eligibility without due reconciliation with GSTR-2B and supplier compliance. That’s risky.”
— A senior CA from Efiletax Network
Taxpayers should regularly:
- Reconcile GSTR-2B with books
- Cross-check vendor GST returns filing
- Monitor 99% ITC rule under Rule 86B
- Maintain robust documentation
Practical Takeaway for Businesses
Ensure ITC Compliance by Following These Steps:
- Monthly Reconciliation of GSTR-2B vs. books
- Vendor compliance check – Use GSTR-1 filing status tools
- Avoid using full ITC if Rule 86B applies
- Use audit trails and internal checks
- Maintain invoices, contracts, and proof of payment
Pro Tip: Use Efiletax’s ITC Tracker Tool to ensure compliant and real-time eligible ITC availability.
What Happens Next in the SBI Cards Case?
The company has acknowledged the show cause notice in its stock exchange filing. It clarified that:
- It will respond within statutory timelines
- There is no immediate financial impact as no demand has been raised yet
- The issue relates to interpretation of ITC provisions
Outcome depends on adjudication by the GST department. If confirmed, SBI Cards may face:
- ITC reversal
- Interest under Section 50
- Penalties under Section 122
Summary
SBI Cards gets GST notice for ₹81.93 crore over input tax credit claims from FY19–FY23. DGGI flags potential violation of Section 16 and Rule 86B of CGST Rules. Company denies wrongdoing and will reply as per law.
FAQs
Q1. What is a GST Show Cause Notice (SCN)?
A notice issued by tax authorities asking the taxpayer to explain why tax should not be recovered with interest and penalty.
Q2. What is Rule 86B of CGST Rules?
It restricts use of input tax credit to 99% of output tax liability for businesses with high turnover, requiring 1% payment in cash.
Q3. Can SBI Cards appeal if the tax demand is confirmed?
Yes, under Section 107 of CGST Act, they can appeal to the Appellate Authority within 3 months of the order.
Conclusion
This case reinforces the importance of careful ITC management. With growing GST audits and AI-based scrutiny, even large corporates are not immune from action. For professionals and businesses, compliance isn’t optional—it’s strategic.