FINANCIAL SERVICES TO GET DEARER MARGINALLY

MUMBAI: Starting July 1 all financial services transactions will attract a higher rate as the Goods and Services Tax (GST) increased the rate of taxation from the current from 15% to 18%.

This includes banking transactions, mutual funds, insurance and stock market transactions which were earlier taxed at 15% including krishi kalyan cess and swachh bharat cess.

“GST applies to all services where this a supply for consideration. So, in banking transactions such as credit card payments, fund transfer, ATM transactions, processing fees on loans etc where the banks are levying charges increased tax rates would apply. This would have a slight inflationary impact,” said Saloni Roy, Partner, Deloitte Haskin & Sells.

The Central Board of Excise Commission, the nodal body for indirect taxes, would issue notifications clarifying exemptions from the flat 18% tax rate. Interest on fixed deposit, bank account deposits etc which do not attract a charge would continue to so even under the new regime. The government on May 19 finalised the tax rates for the services sector. 90% of the services were placed in 18% bracket, which in absolute terms is a marginal increase but is expected to reduce complexity in transaction and ease in availing input credit. Of the total services, 63 have been put in a negative list, that is exempt from tax. In 2016-17, service tax collection jumped to ₹2.54 trillion from ₹2.11 trillion a year ago.