SBI Cards And Payment Services Limited (SBI Card) has received significant relief in a recent Goods and Services Tax (GST) case, as confirmed by a regulatory filing. The Central Goods and Services Tax (CGST) Authority has dropped a substantial GST demand of ₹81.45 crore against the company.

Key Highlights

• CGST Authority drops ₹81.45 crore GST demand against SBI Cards
• A smaller demand of ₹47.54 lakh confirmed due to documentation issues
• SBI Cards plans to appeal against the smaller demand

Details of the GST Case

According to the order passed by the Hon'ble Additional Commissioner, CGST Gurugram Commissionerate, the details of the case are as follows:

The dropped demand of ₹81.45 crore was related to a mismatch between GSTR-2A and GSTR-3B forms. This favorable decision results in more than 99% of the proposed demand being decided in favor of SBI Cards.

Remaining Demand and Company's Stance

The confirmed demand of ₹47.54 lakh is attributed to supplies from units whose registrations were cancelled retrospectively or who have not filed GSTR-3B. This amount, along with applicable interest and an equal penalty, has been confirmed due to a lack of proper documentation.

SBI Cards has stated that it considers this remaining demand to be unsustainable and against well-settled principles of law. The company is confident that this demand will also be dropped at higher appellate levels. As a result, SBI Cards is in the process of filing an appeal against this demand before the Commissioner (Appeals), CGST Gurugram.

Impact and Next Steps

This development represents a significant victory for SBI Cards in its GST-related proceedings. The dropping of the major portion of the demand alleviates a substantial financial burden that was hanging over the company.

While the smaller demand remains, SBI Cards' decision to appeal against it demonstrates the company's confidence in its position and its commitment to resolving all outstanding tax issues.

Investors and stakeholders of SBI Cards will likely view this development positively, as it removes a significant financial uncertainty and reinforces the company's strong stance on tax compliance and dispute resolution.

As the situation continues to evolve, market participants will be keenly watching for the outcome of SBI Cards' appeal against the remaining demand and any potential impact on the company's financial position and market performance.

Shares of SBI Cards & Payment Services and RBL Bank experienced a significant uptick following the Reserve Bank of India's (RBI) announcement of draft guidelines for a new credit risk capital framework. The proposed changes have sparked investor interest, particularly in these two financial institutions.

Key Highlights

• SBI Cards and RBL Bank shares rose up to 5% on the news
• RBI's draft guidelines propose reducing risk weight for 'transactor' category credit cards
• The changes could potentially free up capital for both companies

Proposed Changes and Their Impact

The RBI's draft guidelines suggest a reduction in risk weight for 'transactor' category credit cards from 125% to 100%. Transactors are credit card users who consistently pay their full balance by the due date, avoiding interest charges. This change could have significant implications for credit card issuers and banks with substantial credit card portfolios.

Impact on SBI Cards

SBI Cards & Payment Services stands to benefit considerably from these proposed changes:

• Total receivables: ₹56,607.00 crore
• Transactor users' share: 40% of total receivables
• Potential capital release: 450 basis points (as noted by Macquarie)

The company's significant exposure to transactor users positions it well to capitalize on the proposed risk weight reduction.

Impact on RBL Bank

RBL Bank also sees potential advantages from the proposed framework:

• Credit cards comprise 18% of RBL Bank's loan book
• Total assets under management: ₹21,499.00 crore
• Transactor share: 30% of assets under management

Given its substantial credit card portfolio, RBL Bank is poised to benefit from the proposed changes.

Market Response

The market reacted positively to the news:

• RBL Bank shares closed 4.9% higher at ₹287.00
• SBI Cards shares gained 1.8%, closing at ₹921.30

Conclusion

The RBI's proposed changes to the credit risk capital framework have been well-received by investors, particularly for companies with significant exposure to credit card businesses. While these are still draft guidelines, they signal a potential shift in the regulatory landscape that could benefit certain financial institutions. Investors and industry observers will be keenly watching for the final implementation of these guidelines and their impact on the financial sector.