GST, as we all know, is an indirect tax throughout India to replace taxes levied by the central and state governments. With GST becoming effective from July 1, it is imperative for all the Finance department students of PGDM course to know about the impact of GST on Financial Services of India. From July onward, tax on financial services transactions will rise from the current 15% to 18% as the goods and services tax.
Mentioned below are the impacts that will be seen in financial services of India after GST is levied-
Impact on Mutual Funds– In case of mutual funds, the asset management companies (AMC) incur certain expenses to impact a scheme’s net asset worth (NAV) which in turn attract service taxes. In fact, many components of these service charges such as custodian fees, registrar and transfer agent fees and management fees attract service tax. Upon implementation of GST, the total expense ratio (TER) will obviously spike up given the rise from 15% to 18%. This increase is directly going to affect the investor.
Impact on Insurance Companies- Insurance premiums are set to go up with GST coming to play. Its immediate effect will have to be borne by the customers. However, the non-life companies will continue to get exemption from input tax credit.
Impact on Real Estate- It is often expected that due to the high value transaction involved in real estate, even slightest change in tax can hike up the overall cost. With GST, most of the construction material falls under 18% and 28% slabs but with the availability of input tax credit, the overall impact is expected to be neutralized.
Impact on Banking Services- Services that attract charges such as non-maintenance of minimum monthly average balance or ATM transaction (after the free transactions) will now be taxed at 18% instead of 15%. However, even in this department, the effect is expected to soften a bit with input tax credit.