Under GST, banking and financial services have been placed in the 18% rate slab
After the historic launch of GST or good and services tax, ATM transactions (including withdrawals) beyond free limits and other banking services where service tax was levied will get costlier. Under GST, banking and financial services have been placed in the 18 per cent rate slab, as compared to 15 per cent service tax earlier. Banks are expected to pass on the tax rate hike and it could mean a nominal increase in cost for customers. Similarly, credit card charges/fees where service tax is levied will go up. Insurance premiums will also go up.
However, over time, it is expected that due to reduced cost because of availability of GST credit on items hitherto not available, the price of services will also come down which will benefit the consumers, says Sandeep Sehgal, director-tax and regulatory at Ashok Maheshwary & Associates LLP.
It should be noted that home, auto and personal loan EMIs will not go up. Service tax is not levied on them so they will not be taxable under GST, an SBI official said. However, some one-time cost like loan processing fee and prepayment charges etc will go up nominally as they attract service tax.
Many banks have already intimated customers about the tax changes. With effect from July 1, service tax of 15 per cent is replaced by GST of 18 per cent, ICICI Bank said in an SMS to its customers.
Many banks charge fees for non-maintenance of minimum monthly average balance, cash transactions (deposits and withdrawals) beyond free limits, and ATM transactions (including withdrawals) beyond free limits, SMS alert facility, cheque books beyond free limits etc. They attracted service tax so under GST these fees will go up.
Many insurers have also communicated to their customers about the tax change. In an email to some of its customers, private life insurer Birla Sun Life said: “Due to the enactment of the GST bill, the Service Tax on your premium will be replaced with GST. Your insurance premium will be revised as per the below schedule.”
Description Earlier Service Tax Rate GST Rate
Term/Health Plans 15% 18%
Unit Linked Insurance Plan (ULIP Plans on charges levied) 15% 18%
Traditional /Endowment (1st Year) 3.75% 4.50%
Traditional /Endowment (Subsequent premiums) 1.88% 2.25%
Single Premium Plan 10% 18%
Single Premium Annuity Plan 1.45% 1.80%
Source: Birla Sun Life
Similarly, your health insurance cost will go up. In an SMS to customers, health insurance company Max Bupa said: “Service tax of 15 per cent on your health insurance policy shall be replaced by GST rate of 18 per cent.”