The recent historic launch of the good and services tax, or GST has made headlines all over the world and many experts have speculated the impact of this tax reform on the Indian economy. It is expected that banks will pass on the tax rate hike and it a small increase in cost may be levied on customers for using credit cards & other charges/fees where service tax is levied will go up such as insurance premiums
Banking and financial services have been placed in the 18% rate slab & it is likely that ATM transactions such as cash withdrawals beyond the free limit, and other banking services where service tax is currently levied will get costlier, under the good and services tax.
While there is some confusion about the impact of GST on various EMIs that borrowers are paying. It should be noted that home, auto and personal loan EMIs will not go up since service tax is not levied on them and hence they will not be taxable under GST, an SBI official said. However, loan processing fee and prepayment charges, etc., where service tax was levied will go up nominally.
However, over time, it is expected that due to reduced cost because of availability of GST credit on items hitherto not available, the price of services will also come down which will benefit the consumers, says Sandeep Sehgal, director-tax and regulatory at Ashok Maheshwary & Associates LLP.
Customers have been brought up to speed regarding this too, as many banks have already intimated customers about the tax changes. With effect from July 1, service tax of 15 per cent is replaced by GST of 18 per cent, ICICI Bank said in an SMS to its customers.
If you are considering taking on a personal loan or a home loan, the goods and services tax should not influence your decision a great deal as it is not likely to affect your equated monthly installment by a great deal.
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