• Mr. Kaustubh Sule
• Dr. Lenin Jothi

The introduction of the Goods and Services Tax (GST) on July 1, 2017, marked a pivotal transformation in India’s indirect taxation framework, replacing a complex mix of central and state levies with a unified, technology-driven system. While GST has streamlined taxation across various industries, its implementation within the banking and financial services sector presents unique operational challenges owing to high transaction volumes, multi-state operations, and diverse service offerings. This research paper critically examines the functionality, compliance architecture, and regulatory implications of GST in the Indian banking industry. Banks operate as multi-jurisdictional service providers offering a wide spectrum of financial products such as deposits, lending, foreign exchange services, treasury operations, insurance distribution, financial advisory, and digital banking. Consequently, they fall under multiple GST provisions, including compulsory state-wise registrations, Input Tax Credit (ITC) restrictions on exempt services, cross-charge mechanisms, and detailed tax documentation obligations. Banking operations are further influenced by specialized regulatory norms such as Section 17(4) of the CGST Act, which restricts ITC to 50% of eligible credits, making financial reconciliation and tax optimization more complex compared to other industries. The study evaluates technological systems used across banks to comply with GST mandates — encompassing invoice validation, vendor verification, automated tax computation, and return filing through platforms integrated with the GST Network (GSTN). Additionally, the recent introduction of the Invoice Management System (IMS) has revolutionized ITC eligibility by enabling real-time invoice matching and reducing reconciliation discrepancies. The analysis explores how GST has influenced compliance behavior, financial governance frameworks, vendor transparency, and operational discipline in banks. Findings reveal that GST has enhanced accountability, digitized financial documentation, minimized cascading tax effects, and promoted system-driven tax governance. However, the banking sector continues to face persistent compliance challenges, including multi-state return filings, restricted ITC claims on mixed supplies, dynamic regulatory amendments, and the need for strong internal audit controls. The research concludes that GST has evolved beyond a tax computation mechanism — it now forms an integral component of strategic financial compliance in banks, reinforcing transparency and governance across the Indian financial ecosystem.

GST, Banking Industry, ITC, IMS, Financial Compliance, GSTR-3B, Cross Charge, Digital Governance, GSTN

"Evaluating the Impact of GST on Financial Governance, Compliance, and ITC Utilization in the Banking Industry” ", International Journal of Emerging Technologies and Innovative Research (www.jetir.org), ISSN:2349-5162, Vol.12, Issue 12, page no.a454-a481, December-2025, Available :http://www.jetir.org/papers/JETIR2512064.pdf

"Evaluating the Impact of GST on Financial Governance, Compliance, and ITC Utilization in the Banking Industry” ", International Journal of Emerging Technologies and Innovative Research (www.jetir.org | UGC and issn Approved), ISSN:2349-5162, Vol.12, Issue 12, page no. ppa454-a481, December-2025, Available at : http://www.jetir.org/papers/JETIR2512064.pdf