Equitas Small Finance Bank faces Rs 533-crore GST demand

Fresh updates from the financial markets indicate that Equitas Small Finance Bank is facing a Rs 533-crore tax demand after receiving a show-cause notice from the goods and services tax (GST) authorities in Tamil Nadu, the lender stated in a regulatory filing earlier the current week.

The Chennai-based lender’s stock has slumped more than 8 percent in the last two trading sessions. On September 25, the stock closed more than 5 percent softer at Rs 66.61.

According to the bank's disclosure, the authority's claim includes Rs 485.2 crore in tax, a Rs 48.5-crore penalty, and Rs 11.1 lakh in interest. The core tax demand stems from the department’s proposed disallowance of exemptions on turnover, which substantially pertains to interest income earned from loans and advances.

The GST notice is at least five times the earnings after tax (PAT) generated by the lender in FY26. Equitas noted a PAT of Rs 103 crore in the previous fiscal.

The bank’s preliminary assessment was that interest or discount on deposits, loans and advances is exempt from GST under the relevant provisions, except for interest involved in credit card services.

The bank plans to contest the demand and is examining all matters before giving a detailed response.

“The bank believes that it has substantive factual and legal grounds to contest all the matters boosted in the SCN, including the proposed disallowance of exemption on interest income and the other proposed tax, interest and penalty components,” Equitas stated in the regulatory filing.

“The SCN is at the show-cause stage, represents the position proposed by the authority and does not constitute a final adjudication or crystallised liability.”