The Goods and Service Tax rolled out earlier this year is the biggest tax reform since Independence and is a game changer for various businesses. There is a lot of anxiety in the minds of various stake holders of the financial services business. So how is GST going to affect your loan with CGCL. Is it going to pinch your wallet? Well, not really!!
No change in interest rates:
Interest rate is one of the biggest factor that affects the loan business both from the borrower as well as the lender’s perspective. So here’s the good news! GST will not affect the interest rates be it home loans, SME loans or construction finance loans.
So what has changed?
The service tax on financial services that earlier was 15% has been replaced with 18% GST. So for example, if a financial institution charges anywhere between 0.25% – 1% of the total home loan amount as processing fees, then for a loan amount of Rs. 10 lakhs, earlier the processing fees would have been Rs. 2500 – Rs. 10000 plus 15% service tax amounting to Rs. 2875 – Rs.11500. Now the same would cost Rs. 2950 – Rs. 11800 with 18% GST.
From the above example, one can make out that while the processing fees have gone up post GST, the amount won’t burn a hole in one’s pocket