Maharashtra GST department slaps tax notices on custodians to FPIs The Maharashtra Goods and Services Tax (GST) department has sent notices to several banks on the taxability of custodial services provided by them to foreign portfolio investors (FPIs), said people in the know.

The state GST authorities have taken the stand that the custodial services provided by the SEBI-registered custodian banks do not qualify as zero-rated supplies for the purpose of exports.

The banks, which cater to over 11,000 FPIs registered in India, are now staring at a few hundred crores in taxes on fees earned along with penalties. FPIs wanting to invest in India avail the services of a custodian.

Banks treat this as an export of services because they are rendering services to FPIs who are located outside India and earning fees in foreign currency.