Racing towards the speedy implementation of the biggest indirect tax reform by April 1, 2017, the union government has finally zeroed in on a 4-tier Goods and Services (GST) structure, ranging from 5%-28%. Union Finance Minister Arun Jaitley while announcing the GST rates told, ”we are moving as per schedule. We have been able to finalize the GST tax structure,” The single-tax GST regime will remove all state and central government taxes and lay the ground for a seamless market for goods and services across India. The GST Council decided on four rates of 5%, 12%, 18% and 28%. The council, however, has declined to announce the schedule of goods and services across each of the slab rates. The items, which are currently taxed at 30%-31% (Including Excise Duty & VAT), will attract a tax rate of 28%. Food items fall under 5% rate, with 50% of the goods in Consumer Price Index (CPI being exempted from the tax. While the standard GST rate of 18% will be levied in place of 15% service tax. Let’s see how much impact GST can have on loans and insurance products, which fall under the service category.
The processing fee of loans will attract a standard GST rate of 18% in place of 15% service tax, which are deducted currently. Suppose a bank’s processing fee is Rs. 10,000. Currently, you will have to pay a service tax of Rs. 1,500. But the amount will rise to Rs. 1,800 moment the GST is implemented.
Like loan, insurance will also attract a standard GST rate of 18% on the premium payable. If the premium on your life insurance amounts to Rs. 5,000 at present, your service tax liability will be Rs. 750. However, you will have to shell out Rs. 900 when the GST rolls out.