Fi­nan­cial Ser­vices to Be­come Costlier un­der GST

Consumer Voice - - Contents -

The goods and ser­vices tax (GST) is a sin­gle rate of in­di­rect tax to be ap­plied in In­dia. It sub­sumes all the cen­tral and state in­di­rect taxes presently levied – in­clud­ing state VAT, lo­cal sales tax, oc­troi, en­try tax, pur­chase tax, lux­ury tax, tax on lot­tery, bet­ting and gam­bling, cen­tral sales tax, cen­tral ex­cise du­ties, cus­toms duty, ser­vice tax, cen­tral sur­charges/cess, and en­ter­tain­ment tax – into one sin­gle tax rate for the whole coun­try.

Here is a break­down of the im­por­tant fea­tures: Trans­ac­tion fees in fi­nan­cial ser­vices are ex­pected to be more ex­pen­sive af­ter the govern­ment has put these un­der the 18 per cent tax bracket in the new GST regime. These ser­vices were so far taxed at 15 per cent. The govern­ment has cat­e­gorised 1,211 items un­der var­i­ous tax slabs in the new GST regime. The four bands of tax rates have been fixed at 5 per­cent, 12 per­cent, 18 per­cent and 28 per­cent. As much as 81 per cent of the taxed items un­der GST will fall in/be­low 18 per cent slab. Only 19 per cent of goods will at­tract GST above 18 per cent Fi­nan­cial ser­vices are brack­eted with A/C 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 and note­books, among oth­ers,. Ex­empted items in­clude un­packed food grains, prasad, gur, milk, eggs, curd, lassi, un­packed pa­neer, un­branded nat­u­ral honey, fresh veg­eta­bles, un­branded atta, un­branded maida, un­branded be­san, com­mon salt, con­tra­cep­tives, raw jute and raw silk.

GST on In­vest­ments

• GST will re­move the cur­rent mul­ti­ple tax slabs and con­sol­i­date these into a flat rate.

• The new tax regime will thus cre­ate a lev­elplay­ing field for or­gan­ised and un­or­gan­ised trade sec­tors.

• Pub­lic prov­i­dent funds, bank fixed de­posits and other low-risk se­cure in­stru­ments will re­main un­af­fected by GST.

• Premi­ums for gen­eral in­sur­ance and life in­sur­ance poli­cies will in­crease post-GST.

• Dif­fer­ent bank­ing ser­vices, fees and charges will also see an in­crease in cost due to GST im­ple­men­ta­tion. • The in­creased ser­vice tax on mu­tual fund in­vest­ments due to GST will cause mu­tual funds to be­come slightly more ex­pen­sive. • As a mul­ti­plier ef­fect, the higher ex­pense ra­tio will af­fect the mu­tual fund re­turns by way of re­duced NAV and/or re­duced div­i­dend. The GST rates are in­dica­tive till the Bill is passed into an Act of Par­lia­ment; state as­sem­blies will also have to pass the Act in their re­spec­tive states. Hence, amend­ments moved by the Govern­ment of In­dia will have ret­ro­spec­tive ef­fect. As of now, the Govern­ment of In­dia is likely to roll out GST from 1 July 2017.

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