3rd April 2017
With the introduction of GST our Hon’ble Prime Minister, Mr Narendra Modi is set on a mission to cut through the layers of taxes that’s been prevailing in this country and unify them under simpler taxation system.
This is the most awaited tax reform in the history of independent India and is a step closer to making India one of the fastest developing economies of the world. By bringing about this change the Government aims at improving India’s GDP by 2%, which is considered as a remarkable change.
While every sector is going to be hit by this change; the banking sector is going to be at the eye of the transformation storm.
GST implications on the banking Sector.
For Long, Indian tax system has been subjected to multiple indirect taxes levied on its citizen. This path-breaking transformation is set to revolutionise taxation in India.
Banking sector is sensitive to change, after demonetisation GST is set to make its mark in the development of Indian Economy.
For The Consumers
Banking and a Financial sector is one of the pivotal sectors that is fuelling the growth of the country. Consumers can expect a rise in expenditure are service charges that were earlier 14.5% are now expected to reach 18% - 20% after the implementation of GST.
For The Banks
A lot has been brewing up with the oncoming GST laws. A new law is set to trigger tension in bank operations. Financial institutions such as banks will now have to face the complex taxation procedures introduced by the incoming of GST.
This regulation is set to leave the banks with complicated tax paying procedures as it introduces a tax to be levied on transactions between branches of the same bank. As inconvenient as it sounds this regulation has raised many eyebrows.
Training programs have already commenced across various locations in India. With the onset of this widespread training program, banks have realised that this law is here to stay.
With nearly 20 lakh sales tax officials already being trained to practise this new law; GST committee is trying to get the states into an agreement with the centre by July 1, 2017.
Efforts have been made by banks of both private and public sector to amend this new law through written communication to the GST officials. As per the claims made by the banks, this new regulation has no grounds on which such services can be valued and therefore complying with such amendments would not be possible.
The four slab rate structure i.e. 5%, 12%, 18% and 28% which was agreed upon last year remain unchanged. The peak rate will not be altered and it is only a provision built to address emergency situations in future.
The Central GST and state GST can both reach 20% tax rate respectively. Reaching a maximum level of 40% of the tax rate.
Furthermore, GST council has also proposed to raise tax peak from the current 14% of service charges to a new rate of 20% in this new model of GST Bill.
Take away: GST is definitely a promising change, but should it come with a hefty price of service tax is a question unanswered. Banks have opposed with a written statement but the final verdict lies in hands of the central government.
July 1, 2017 is going to be a turning point in lives of many consumers and the economy will witness a major shift in investment decisions and patterns of its citizens.
2017 © Monetic Corp Consultants Private Limited - U74999DL2013PTC261819
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