Jammu & Kashmir Bank has received a significant GST demand notice from tax authorities, marking a major regulatory development for the banking institution. The bank disclosed this information to stock exchanges on March 24, 2026, in compliance with SEBI listing regulations.

GST Demand Details

The Additional Commissioner, Central GST Commissionerate, Jammu issued a demand order dated March 23, 2026, which the bank received on the same day at 5:46 PM. The financial implications are substantial, with the demand covering both primary liability and penalties.

Nature of Alleged Violation

The GST demand centers on the bank's Transfer Pricing Mechanism (TPM), specifically targeting interest receivable under TPM between corporate headquarters and branches from a common pool of funds. The tax authority has classified these transactions as financial services subject to GST liability.

The demand order covers an extensive period from February 23, 2020, to March 2024, encompassing transactions under the bank's TPM framework. This mechanism represents an internal allocation system used by banks to determine pricing for incremental loans, investments, and deposits.

Bank's Position and TPM Framework

Jammu & Kashmir Bank has outlined its defense strategy, emphasizing the regulatory foundation of TPM systems. The bank highlighted several key points regarding TPM operations:

• TPM serves as an internal allocation and measurement mechanism for fund exchange between business units
• All TPM entries are purely notional in nature and nullified in entity-level financial statements
• The mechanism was adopted pursuant to Reserve Bank of India guidelines dated October 7, 1999
• TPM functions as a critical component of profitability measurement, allocating Net Interest Margin (NIM)

The bank maintains that TPM transactions should not be treated as financial services attracting GST provisions, citing expert opinion supporting this position.

Legal Strategy and Court Precedent

Jammu & Kashmir Bank expressed confidence in challenging the demand through appropriate legal channels. The bank cited expert opinion suggesting the demand lacks legal justification and anticipates favorable outcomes in court proceedings.

Significantly, the bank referenced an existing precedent where the Hon'ble High Court of Jammu and Kashmir & Ladakh at Srinagar granted a stay order against a similar GST demand on TPM transactions for another GST registration of UT of Jammu and Kashmir.

Expected Impact Assessment

Despite the substantial monetary value of the demand, Jammu & Kashmir Bank assessed that the order will have no material impact on its financials, operations, or other activities. This assessment is based on:

• Strong case merits supported by expert legal opinion
• Precedent of court stay orders on similar demands
• Confidence in the legal recourse strategy
• Understanding that TPM represents standard banking practice across India

The bank's disclosure fulfills requirements under Point 20 Part A of Schedule III to Regulation 30 of SEBI (Listing Obligations and Disclosure Requirements) Regulations, 2015, ensuring transparency with stakeholders regarding this regulatory development.

Jammu & Kashmir Bank Limited has successfully concluded its postal ballot process and submitted the detailed proceedings to stock exchanges under Regulation 44 of SEBI (Listing Obligations and Disclosure Requirements) Regulations, 2015. The postal ballot was conducted with a record date of February 13, 2026, and involved 242,452 total shareholders.

Regulatory Submission and Compliance

The bank submitted the postal ballot proceedings to National Stock Exchange of India Limited and BSE Limited on March 23, 2026, through a formal communication from Company Secretary Mohammad Shafi Mir. The submission was made pursuant to Regulation 44 requirements for appropriate dissemination of material information.

Board Decision and Process Framework

The Board of Directors decided on February 17, 2026, to obtain shareholder consent through postal ballot for three special resolutions. The process was conducted under Section 108 and 110 of the Companies Act, 2013, along with applicable MCA circulars and SEBI regulations. The bank utilized National Securities Depository Limited services for facilitating electronic voting.

Resolution Results and Voting Details

All three special resolutions were passed with overwhelming shareholder support across different categories.

Resolution 1: Re-appointment of Independent Director

The re-appointment of Ms. Shahla Ayoub (DIN: 09834993) as Independent Director for a three-year term from December 26, 2025, to December 25, 2028, received strong approval:

Resolution 2: Appointment of New Independent Director

The appointment of Mr. Prafulla Premsukh Chhajed (DIN: 03544734) as Independent Director for a three-year term from February 18, 2026, to February 17, 2029, achieved the highest approval rate:

Resolution 3: Tier I Capital Raising

The resolution for raising Tier I Capital up to Rs. 750 crores by the Bank was approved with substantial majority:

Scrutinizer Oversight and Validation

Mr. Arshad Hussain Mir, Partner at M/s Amir Jan & Associates, Chartered Accountants, served as the appointed Scrutinizer for the postal ballot process. The scrutinizer submitted the final report on March 23, 2026, confirming that all three special resolutions were passed by the requisite majority as per the Companies Act, 2013, and related regulations.

Capital Raising Authorization Details

The approved Tier I Capital raising resolution authorizes the Board to issue equity shares and other permitted securities for an aggregate amount not exceeding Rs. 750 crores through various modes including Private Placement, Qualified Institutional Placement (QIP), or other RBI-approved methods. The resolution includes comprehensive provisions for pricing, allotment procedures, and regulatory compliance requirements under SEBI ICDR Regulations and other applicable laws.