J&K Bank GST Clarification: CBIC Validates FTP Interest Exemption

Jammu & Kashmir Bank Ltd has received a significant clarification from the Central Board of Indirect Taxes and Customs (CBIC) regarding the Goods and Services Tax (GST) treatment of its Funds Transfer Pricing (FTP) mechanism. The CBIC, through a circular dated October 28, 2026, has clarified that the notional interest recorded in banks' books under the FTP mechanism is considered 'interest' and is therefore exempt from GST under Notification No. 12/2017-Central Tax (Rate). This clarification validates the bank's long-standing stance that FTP amounts are notional interest and not taxable. The bank had previously faced substantial demand orders for GST, interest, and penalties totaling over ₹8,130.66 Crores and ₹200.20 Crores, against which it had obtained interim protection from the High Court. With this clarification, the bank intends to pursue the quashing of these demand orders.