19 Jun 2017, 08:47 — 4 min read
In recent months a lot has been said about GST and its impact on various industries as well as consumers. Politicians, economists and industrialists have been speculating a lot on the short-term as well as long-term impact of the upcoming tax reform. Let us talk about its impact.
Currently, there are two types of taxes that the Indian government levies– direct taxes (income tax) and indirect taxes. Indirect taxes are paid by all consumers through another individual or organisation to the government, such as, luxury tax, excise duty, service tax, value added tax, etc.
With GST rolled in, the indirect taxation process will get streamlined, and various types of taxes will be covered under a single head. GST will be levied on goods as well as services. Multiple taxes will eventually end, and compliance will be reinforced.
The new tax system will not only increase the ease of doing business, but will also be easier to comply with, as there will be fewer departments to deal with while paying tax.
For consumers, GST is expected to bring some joy, as goods used on a daily basis will be cheaper; and luxury items may see a price-rise. Services are set to be costlier though. Banking and lending sectors are a part of the service industry, and there are bound to be changes here too.
As per the new tax system, various fees that the consumers pay while making banking/ financial transactions will be taxed marginally higher. As per the new tax structure, various charges such as processing fee, closing fee, legal fee, etc. will now be taxed at 18-20% (currently the tax rate is 15%). There could be a steep increase in the borrowing costs for loan borrowers. Apart from loans, insurance premiums and banking charges could also become costlier.
Credit card borrowing could also become expensive. Any additional interest that credit card companies charge for delayed payments or defaults will call for taxes, thus, making credit card usage more expensive than before.
Even with financial services becoming costlier, all is not lost for consumers. The bright side is that there are still ways to control costs and lower the overall impact of inflation. For example, borrowers who are looking for loans can save on borrowing costs by applying for loans online. Online lending platforms can get them access to various lenders on a single platform at no added costs. Moreover, borrowers can save their time and effort by applying from the comfort of their home or office. The online lending process is fast, easy and paperless.
While some goods will get costlier, and others may get cheaper, the overall impact is speculated to lead to a larger good.
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