GST has been in the limelight
ever since it was proposed and it has more been so in the past few months.
Recently on the midnight of June 30th, India’s most celebrated and
most anticipated economic reform of the century finally rolled out at the
famous Central Hall of the Parliament which hosted the massive launch witnessed
by a number of senior Govt officials, Political leaders, Ministers, etc. And as
it always goes with any big event, GST is surrounded by a plethora of
speculations and hoax news, one of which was that credit card transactions will
be taxed twice. The same was clarified by the Revenue Secretary Dr. Hasmukh
Adhia as being false, and ensured that the news was baseless, urging public to
confirm with the authorities before sharing any such matter. The double
taxation on credit card transactions simply turned out to be a bogus news
spread on social media to wreak havoc and cause confusion amongst the general
public.
Though it is true that the tax
rate on the use of Credit Cards has been hiked to 18% from
the previous 15%, increasing the end cost accruing upon such payments, you can
heave a sigh of relief that it will not be charged twice like the hoax claimed.
The GST Council has also stipulated the tax slab of 18% upon other transactions
like banking, insurance premium payments, etc. and the same shall apply to loan
processing fee, fund transfers, ATM withdrawals (beyond the maximum number of
free transactions), SMS alerts, issue of Cheque Books/DDs, etc. Banks and Insurance Companies
have communicated the change to their customers via E-Mails or SMS, and the implication
on the hike on public and the market is yet to be analyzed. Whether any
eventual benefit accruing due to the availability of Input Tax Credit on items
which were not previously subject to the benefit would in turn be transferred
to the consumers, and if so, how much time would elapse for this to come true,
is to be seen in time.
Apart from the tax imposed on
the service offered by the Bank to the Customer, there is no separate amount of
tax that will be imposed on the individual card transactions entered into by
the customer. The tax for the service is different from the amount of Merchant
Discount Rate will only be charged by the bank against the merchant, and it
will be passed on to the customer. The rate charged to a merchant by a bank for
providing debit and credit card services[i],
and this is previously agreed upon between the Bank and the Merchant while
availing the service.
It is still not certain as to
what amount of savings may eventually accrue from the credit input that may now
be availed by the Banks,
and only forecasts have been possible. Only those services that attract service
charges would be liable to the new tax too, and rates like home/auto/personal
loan EMIs will remain the same. On the other hand, one-time processing fees
that are subject to service charges would be subjected to the hike. Term health Plans, ULIP
(where charges apply), and Single Premium Plans would see a hike of 3 points
from 15% to 18%; while Traditional Endowments and Single Premium Annuity Plans
will see only a nominal increase.
In short, the new rates come
with both a boon and a liability intertwined, in that certain service charge
rates will go up, but it may be hoped that the input tax credit available to
banks now will help to bring down the costs in time. Bottom liner goes that
instead of believing every other exaggerated post on social media, it is better
to refer to reliable documents published by the Authorities, to gather
knowledge about GST (or any other Govt initiative, law or Rule, for that
matter)! As for GST, please go through the CGST Act[ii],
IGST Act[iii],
the Rules[iv]
and Rates[v]
as published by the Office.
[i] Merchant
Discount Rate http://www.investopedia.com/terms/m/merchant-discount-rate.asp#ixzz4lrLLFBmg
[ii] The
Central Goods and Services Tax Act 2017 (No. 12 of 2017)
[iii] The
Integrated Goods and Services Tax Act 2017 (No.13 of 2017)
[iv]
GST Rules, 2017
[v]
GST Tax Rates, 2017
No comments:
Post a Comment