GST and Banking Sector
The banking sector has always been the strong-holding pillar of thee Indian economy.
Under the new tax regime, GST rate for financial services transactions, such as banking, mutual funds, insurance and stockbroking has been charged at the rate of 18% in comparison to the previous banking and financial service tax, levied at 15%. Thus financial service transactions are marginally costlier.
GST applies to all services wherein there is a supply of services for consideration. So, in banking transactions such as credit card payments, fund transfer, ATM transactions, processing fees on loans etc., on utilization of banks services, extra charges get levied, thereby an levying charges, an increased tax rate applies.
Moreover, Interest on loans, trading of securities, foreign currency and retail services also fall within the ambit of GST. Thus, it appears so imposing GST on banking and financial services makes the financial services costlier.
However, interest on fixed deposits, bank account deposits etc. which do not attract a charge remain the same, even under the new regime.
The GST scheme under the banking sector possibly gives rise to service inflation, however only time can tell, how the almost sinking banking sector thrives on an increased rate of service charges.
Dated: October ’17.