Investment banking experts are waiting for clarity on rules that will govern how the Goods and Services Tax, which is proposed to be implemented in April 2016, will be implemented on financial services, saying it will impact their competitiveness.
Analysts say that while currently the location of the client is immaterial for either an investment bank or the client himself, this would change once GST is implemented.
“Hypothetically if a Mumbaiheadquartered investment bank has a mandate of an Orissa-based firm for an IPO how would the GST be calculated?” said Sameer Gupta, financial services tax leader, EY.
“One of the biggest issues is which state should charge GST, where the client is located or where the service provider is located? If the rules are linked to the latter, it could mean that many niche investment banks could become more expensive compared to those who have an office where their client is,” he said.
If that is the case, then players such as ICICI and SBI, which have a national presence, will have a clear competitive advantage over multinational rivals that operate from a place like Mumbai or New Delhi and serve clients across the