GST, the goods and service tax levied on financial services transactions such as banking, mutual funds and insurance has been raised from 15% to 18% from 1st July 2017. This new GST implementation has deeply impacted the banking sectors, one of the huge pillars of Indian economy, along with a slew of other financial services and products as well including the credit card, loans and stockbroking. In such a scenario where banks are charging increased tax rates due to the new GST regime, most people, especially those who have invested in fixed deposits are baffled about what impact GST will lay on bank and post office FD interest rates.
Well, it may come as a surprise to many that the implementation of GST does not have a direct impact on Banks FD interest rates. However, there are chances that this new tax regime may increase inflation in a couple of years as services will become more expensive with the GST implementation. If this happens, the interest rates on fixed deposits offered by banks and post offices are likely to increase for short term at least. The 18% of standard goods and services tax (GST) may not create a huge inflationary pressure at once. However, experts believe that it may ember higher inflation gradually.
Though GST will not have any impact on bank and post office FD interest rates, it is likely to have influenced people’s finances drastically because now individuals will have to pay 18% service tax instead of 15%. On one side where GST is compelling people to pay more tax, on the other hand, it will bring uniformity in the process and centralized registration that will enable people to start a business easily and expand it in a different region in a less-intrusive manner.
Other Benefits of GST include:-
- The new GST regime will eliminate the small border taxes so that interstate movements become cheaper and less time-consuming. It will be of assistance in resolving check-post issues that will reduce logistic cost of companies which are producing non-bulk goods as much as 20% and also reduce the time taken to reach across borders.
- New businesses are likely to get higher tax exemption from GST. It empowers small businesses with turnover between Rs 20 and 50 lakhs to pay lesser taxes. Earlier, in the VAT markup, any business with revenue of more than Rs 5 lakh was liable to register for VAT and pay taxes. However, under GST this entry for registration has been increased to Rs 20 lakhs, which is a breather for founders of many startup companies and small businesses.
- GST empowers small businesses with the turnover of Rs 20 and 50 lacs to pay less tax by using the composition scheme. This move will lower down the burden of many small businesses.
- GST will also rationalize the real estate tax structures which otherwise include a plenty of tax at both the central and state level. Under GST regime, the transaction fee in financial services is expected to increase significantly.
GST or the Goods & Service tax is an indirect tax charged on the manufacture and supply of goods and services at a national level. The idea behind this new tax regime is to eliminate all the indirect taxes such as VAT (Value Added Tax), excise and service tax levied by the central and state government of India on goods and services. Like it is said,” change is inevitable” and with the implementation of GST, it is quite obvious that the Government of India is taking good initiatives to make the life of its citizens simpler and more convenient.
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