Equitas Small Finance Bank has received a Show Cause Notice (SCN) from GST authorities proposing an aggregate demand of ₹533.81 crore. This amount comprises tax, interest, and penalty, largely due to a proposed disallowance of exemption on interest income from loans and advances. The bank believes it has grounds to contest this demand and is preparing a detailed response.
Substantial Tax Demand Issued
Equitas Small Finance Bank announced on September 22, 2026, that it has received a Show Cause Notice (SCN) from the Deputy Commissioner (ST), Government of Tamil Nadu. The notice, dated September 19, 2026, relates to the financial year 2022-23 and proposes an aggregate demand of ₹533,81,24,251. This includes a tax component of ₹485,18,30,588, interest of ₹11,10,604, and penalty of ₹48,51,83,059.
Dispute Over Interest Income Exemption
The majority of the proposed tax demand, amounting to ₹479,33,04,094, stems from a proposed disallowance of exemption on turnover, specifically related to interest income earned from loans and advances. The bank asserts that this interest income is generally exempt under Entry 27(a) of Notification No. 12/2017-Central Tax (Rate), except for interest in credit card services. Equitas Small Finance Bank has consistently applied this tax treatment.
Bank’s Position and Next Steps
The bank has conducted a preliminary assessment and believes it possesses substantial factual and legal grounds to contest the matters raised in the SCN, including the proposed disallowance of exemption on interest income. The bank emphasizes that the SCN represents the authority’s proposed position at the show-cause stage and does not constitute a final adjudication. Equitas Small Finance Bank is in the process of examining all aspects of the notice and will submit a detailed response, along with necessary reconciliations and supporting records, within the stipulated timeline. The ultimate financial impact will depend on the outcome of these proceedings.
Source: BSE
