GST Impact On Banking Services

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The Indian banking industry is one of the biggest service industries. In our country, there are several private and government banks. GST news suggests that like many other service industries including insurance and trading, banking services will also be hugely impacted.

The new tax structure, GST, has finally become a reality. After the GST roll out on July 1’2017, be ready to shell out some more money for banking services according to the GST news today. Also,the implementation of GST in the banking sector will not be very smooth. Since the ambit of banking services and its operations are huge, we can only hope for a smooth transition.

Impact of GST on Banking Services

The GST news confirms that the GST is going to increase the cost of banking services. As of now, the service tax rate which is charged for the banking services is 15%. But under the new GST model, this tax rate has been increased to 18%. Hence, making the banking services costlier by 3%.

If the customer demands more than 50 cheques a year, he will have to pay the service taxand Rs.75 for each cheque book. However, the rates for cheque books vary with banks. Pre-GST, the banks charged Rs.15/- for 3 months for sending SMS alerts. But now customer would have to pay Rs.18/- for SMS alert service. Though, this is marginal, but more burden on customers also comes along as most of the banking services like fund transfer, debit card, ATM with drawl after a few free transactions, home loan fees, locker rentals, passbooks (duplicate), bill collection, cash handling fees, outstation bill collection, demand drafts, RTGS, safe deposit customer charges, NEFT etc. is going to become way costlier.

For example, for ATM withdrawal services, the customer will have to pay Rs.3/- more for every Rs.100 for banking transactionsleaving the hole in pockets of customers. However, exact impact of many services cannot be still ascertained.

Deploying ATMs will be most expensive as it is part of the highest GST slab of 28% as per the GST news today. Smaller banks may find hard to cope-up with the increased prices and hence may step back from deploying many ATMs causing a hit in the banking services.

For banks, finding out if a transaction is intra-state or inter-state and whether the payment is for CGST, SGST, or IGST is a difficult.The GST news today also highlights that a transaction held between the two separate branches of the same bank will also be charged GST.

Inspite of all the challenges, it is expected that it will be easier to do business under GST. Keeping in mind the benefits like the creation of a national market, ease of doing business, better productivity, improved tax compliance, the GST will bring, the industry has welcome the new tax reform. Though business news suggests that the banking services would cost more now, but in the end the consumers will avail the benefit of GST in long run.

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