Goods and Services Tax Basic Impact after implication of GST on the Personal Loan

Basic Impact after implication of GST on the Personal Loan

Basic Impact after implication of GST on the Personal Loan

Basic Impact after the implication of GST on the Personal Loan 

The impact of GST on personal loans has been remarkable reforms in the new tax regime under the One Nation, One Tax, One Market concept under GST. Basically, the aim of tax structure impacted every sector of the economy especially in banking and financial services.

Recently, the banking and financial sector was found bracket of a 15% service tax. However, after the implementation of GST, the banking and financial sector has now come in the slab of 18%.

Looks how goods and service tax will impact the loan sector especially the personal loan segment. In all the forms of credit, a personal loan is a popular form due to multi-purpose i.e, home loan, business loan, etc.

So basically what is the implication of GST on a personal loan?

The implementation of GST does not impact the difference in the segment of a personal loan. Impact of service tax that was 15% now it becomes 18% which means, there is an increase of 3% in your service tax.

However, there Is no attraction to EMIs of personal loans, home loans, and auto loans. Because generally, taxes are not levied on EMIs. However, the one-time miscellaneous cost including processing fees, prepayment charges, and more will go up. Since such costs are paid for a service, it will attract service tax, which in turn will add 3%.

https://carajput.com/blog/how-to-reduce-your-loan-burden-smartly/

How much increase will be there on service tax on prepayment charges under the loan?

Generally, banks charge 2%-5% as prepayment charges on the outstanding loan. So if  Ram takes a loan of Rs 7 lakhs, then the prepayment charges will range between Rs 14000- 35000. Then service tax at the rate of 15% on the same would making an increase of  Rs 420 to Rs. 1050.

How much increase will be there in service tax on processing fees?

Basically, all banks charge 1% to 2% of the loan amount plus service tax. Before a GST, service tax was calculated as 15% on the processing fee. That’s why the GST, service tax calculates will be 18% on the processing fee.

For example, if Ram takes a personal loan of 5 lakhs the processing fee will be between 1% to 2% of the loan amount be between 5000 to 10000. The service tax then calculated would have been ranged between 750-1500.

After the implementation of GST, the service tax calculated will be 900 to 1800 resulting in an increase of 150 to 300. Even though there is an increase in the cost of acquiring a personal loan, the burden of the increase in cost is not that high on the borrower. This is why getting an easy personal loan online will always be a popular option for finance.

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Rajput Jain and Associates 

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