You will have to shell out more for banking transactions from July
These services were so far taxed at 15% and the hike in the tax rate means that individuals will have to pay Rs 3 more for every Rs 100 paid.
These services were so far taxed at 15% and the hike in the tax rate means that individuals will have to pay Rs 3 more for every Rs 100 paid for banking transactions, tax experts said.
“Financial institutions may be able to absorb this tax on behalf of companies which do bulk transactions but individuals will certainly have to pay more, though it is unlikely to have any large impact on demand,” said Sachin Menon, partner and head indirect tax at KPMG.
The government has categorised 1211 items under various tax slabs in the new GST regime. The broad range of tax rates is between 5% and 28% with some goods like milk, eggs, fresh fruits, vegetables, fresh meat, fish, chicken, stamps, judicial papers, printed books, newspapers, etc are exempt according to the government announcement earlier this week.
A large number of goods and services are kept under the 18% tax slab. Financial services are bracketed together with AC hotels that serve liquor, telecom and IT services, branded garments, flavoured refined sugar, pasta, cornflakes, pastries and cakes, preserved vegetables, jams, sauces, soups, ice cream, instant food mixes, mineral water, tissues, envelopes, notebooks etc.
“Overall it is a balancing act in the prevailing circumstances. Even insurance premiums will go up depending on the structure of the policy and how much of the premium is classified as risk and how much is classified as investment,” Menon said.
Banks will also have to register their branches state-wise under the new regime, unlike currently when branches were registered through the bank’s headquarters. “This will increase the compliance cost for banks initially,” Menon said.