The Jammu & Kashmir and Ladakh High Court has granted interim relief to Jammu and Kashmir Bank by staying the recovery of a massive ₹16,260 crore demand raised under the Goods and Services Tax (GST) regime. The demand, which also includes an equal amount in penalty, was issued by the Additional cum Joint Commissioner, Central GST, and has now been challenged by the bank through a writ petition.
Represented by Advocate Tasaduq H Khawaja, the bank argued that it functions as a single legal entity registered under both the Central and J&K GST Acts, with its branches and corporate headquarters operating as one unified institution under RBI supervision. The bank contended that the internal fund transfers between branches and the head office—executed under a Transfer Pricing Mechanism (TPM)—are purely accounting processes and do not constitute taxable transactions under GST.
The petition explained that deposits collected across branches are pooled and redistributed for lending purposes, a standard practice in banking that doesn’t involve service provision between independent entities. Since money is excluded from the definition of goods and services under GST, and interest income is specifically exempt, the bank stated that these internal transactions do not attract GST liability.
The bank further claimed that such TPM practices are universally adopted across the Indian banking sector, following RBI guidelines issued in 1999. It argued that the demand and penalty were based on a misinterpretation of these internal processes and do not have a legal basis.
Appearing on behalf of the Union Government, Advocate T.M. Shamshi sought time to file a detailed response. Observing the gravity of the legal issues raised, the bench of Justice Rajnesh Oswal and Justice Mohammad Yousuf Wani stayed the recovery proceedings until further notice. The next hearing is scheduled for May 7, 2025.
