All banking services such as ATM withdrawals, cheque book issuance, demand drafts and cash deposits will get costlier from July 1 with the implementation of Good and Services Tax (GST).
Under GST, financial services have been put under the 18 percent slab, whereas currently customers pay 15 percent service tax for them.
As the historic tax reform is set to be passed, banks, insurance firms and financial institutions will pass on the entire 3 percent hike to their customers.
Rajeev Rishi, Chairman of Indian Banks’ Association and Managing Director of Central Bank of India, said, “It will be a nominal hike for the customers. We are ready with the GST transition and banks have registered with the authorities in each state.”
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Adhil Shetty, CEO, BankBazaar.com, an online financial services aggregator, said, “It appears banking services may become marginally expensive post GST. Banking transactions that have an associated services charge – credit/debit cards, NEFT/RTGS transfers, ATM transactions, processing fees on loans etc. – would go up from the current 15 percent to 18 percent post GST. Shetty also said that much of this increase will be neutralised by the input tax credit which the banks are entitled to under GST.
Services such as FDs, bank account deposits, etc., that do not have an associated charge currently continue to remain outside the GST net. The final list of exemptions from the flat 18 percent tax rate is still not out, so it is too soon to speak about the exact implications, added Shetty.
A senior SBI official said, “Banks are not in the position to absorb the increase in costs due to GST. It will be a small hike for customers. There will be an increase in costs for us except for the interest cost on deposits. Hence, banks will pass it on.”
State Bank of India (SBI) charges Rs 20 plus service tax (15 percent), for each withdrawal at banks beyond four free transactions. Currently, for withdrawing Rs 10,000, you need to pay a sum of Rs 20 (plus Rs 1,503 as service tax). Under GST, this transaction will attract a service charge of Rs 1,803.
A senior branch manager at ICICI Bank said, "Our systems are ready for the transition and we are awaiting more instructions from our senior management."
Most public and private sector banks have sent SMSes and emails to their customers informing the implementation of GST from July 1 and subsequently will see a rise in the tax rates for its services.
ICICI Bank’s SMS to its customers said, “The government of India has announced the implementation of the Goods and Services Tax (GST), which is likely to be effective from July 1, 2017. Please note, the existing service tax rate of 15 percent for ICICI Bank Credit card shall be replaced by a GST rate of 18 percent as applicable for banking and financial services.”
Chanda Kochhar, MD and CEO, ICICI Bank said, “The Goods & Services Tax is a transformational structural reform which will have multiple benefits – the creation of a national market; enhanced ease of doing business; greater productivity & efficiency; and improved tax compliance."
Service tax on your insurance policy premium will increase from Rs 1500 to Rs 1800 after the GST rollout.
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