05/02/2024
Before GST, there was a Service Tax which was levied on an allotment of loans. The rate of Service Tax was 15% which has now increased to 18% for GST. According to the opinion of lots of people, the effective loan amount will increase due to higher GST rates by 3% over Service Tax rates. While others say that increased GST rates will increase EMIs. However, all the doubts of people will also be cleared that GST is not collected on repayment of loan or payment of interest on the loan.
GST is levied on the processing charges and any other charges rather than the principal repayment and interest payment amount. Among others, the included charges are Loan Processing, Loan Prepayment Charges, etc, if any. Since a major part of the loan repayment consists of principal repayment and interest payment, the GST effect on loans would tend to be negligible. To have a better understanding of the GST impact have a look at the mentioned GST impacts on loans.
The important loans and their respective GST rates are listed down here.
Personal Loan– 18%
Home Loans– 18%
Car Loan– 18%
GST on Cars
Since the implementation of GST on cars, the GST rates on all personal use vehicles have been fixed at 28% no matter whether the vehicle is petrol-powered or diesel-powered. Other than this, a composition cess is also levied on cars over the announced GST rates. This, in turn, estimated the applicable tax rates on vehicles under GST between 29% to 50%. However, vehicles using cleaner technologies such as fuel cells (e.g. hydrogen fuel cells) and electric vehicles attract subsidized lower rates of taxation. Know more about GST on cars.
GST on Gold In India
Since gold-made items (jewellery) are brought into the GST system, the rates applicable are 3%. However, a 5% GST is also levied as jewellery-making charges if the manufacturing task is being outsourced from a job worker. The Jeweler is liable to claim these making charges as an input tax credit (ITC) which in turn calculates the final bill to be paid by the purchaser only at a chargeable 3% GST charge. Know more about GST on Gold and its impact on the gold industry.
GST On Real Estate
In the real estate sector, the GST is levied only on the purchase of an under-development property. After the inclusion of real estate under the GST regime, the applicable tax rates on commercial and residential transactions were 12% valid till 31st March 2019. But, from the very next day, Ist April, the GST rates on residential real estate have been altered to 5% for non-affordable housing properties while for affordable housing properties levied tax rate is 1%. on the other hand, the ready-to-move-in property is not liable to attract any GST. In addition to this, various building materials used for the construction of houses/flats that fall under GST are taxable from 5% (sand, marble rubble, etc.) to 28% (cement, etc.). Know more about GST’s impact on real estate in India.
Products Likely to Introduce Under GST Slab Rates
The Government is considering some new tactics so that a few new products could also be brought into the GST system. The Finance Minister hinted the same that the government could include other products under GST with tax rates reduction on some products. The highly anticipated products to introduce under the GST rates slab include:
Petroleum products- Petrol and Diesel
Land
Electricity
Others
GST Impact on Indian Economy
The introduction of GST has turned the Indian economy upside-down and it became only possible by bringing in the net appropriate price for the goods and services under a single taxation system. A few of the important GST rate impacts on the Indian economy are listed below:
Increase in Production, Increase in Competition
The GST implementation in the country has brought down the prices of goods and services and consequently, the final consumer experiencing less tax burden on the goods and services. It has been seen that the GST system has extended the scope of increased production which increases competition.
Simple Tax Structure
The introduction of the single taxation system, GST has simplified the calculation of tax to a greater extent. In addition to this, the existing multiple taxations have been superseded which results in saving of time and money.
Uniform Tax Regime
Earlier, the applicable multiple taxes at almost every stage of supply made the taxpayers confused. But with the GST, a uniform tax system has been established in the country for an easy collection of tax.
Increase in Exports
Since the day GST got imposed in the Indian economy, the cost of production has been seen falling. Consequently, the competition towards international markets has increased which directly impacted the exports positively.
Protest Against GST Rates
The implementation of GST brought various traders, cloth merchants, and private security agencies to protest against GST rates. Cloth merchants were in protest against the 5 % sales tax on textiles under this new tax regime while the iron, wire dying and steel traders were opposing high GST rates. The steel traders were pushing their forces to prove GST high rates and elaborated paper works responsible for a 40% collapse in trade
Also, the owners and employees of private security agencies silently held a protest against the levied GST rates of 18% on security services because with the higher GST rates a major part of their wages and benefits were taken away from them.
GST Rates on Services
The government implied GST on services, which follows a similar 4-tier tax structure as on goods. The GST rates of 5%, 12%, 18% and 28% on goods, were affecting consumers with several pros and cons on services. However, services such as healthcare and educational services were excluded from GST. The passed GST rates slabs from the GST council consist of NIL, 5%, 12%, 18%, and 28% rates on different services. Some of them are mentioned below under different categories.
Nil GST
Chargeable services are offered on Basic Savings Bank Deposit (BSBD) accounts opened under the PMJDY (Pradhan Mantri Jan Dhan Yojana)
5% Tax Slab
Railways-Transportation of goods, passengers
Goods transported in a vessel from outside India
Renting a motor cab without fuel cost
Transport services in AC contract/stage or radio taxi
Transport by air (scheduled)/air travel for the purpose of pilgrimage via chartered/non-scheduled flights
Tour operator services
Leasing of aircrafts
Print media ad space
Working for the printing of newspapers
12% Tax Slab
Rail transportation of goods in containers from a third party other than Indian Railways
Air travel excluding economy
Food /drinks at restaurants without AC/heating
Renting accommodation for more than Rs.1000 and less than Rs.2500 per day
Construction of building for sale
IP rights temporarily
18% Tax Slab
Renting of truck/goods carriage where the cost of fuel is included
Transport of goods and passengers by ropeways. (with ITC)
Services Supplied to Chit Fund
Job work in relation to the processing of hides, skins, etc
Manufacture of footwear and clay bricks
Works contract for roads, bridges, railways, metro, effluent treatment plant, crematorium etc.
Works contracts are supplied to central and state governments, local authorities for historical monuments, canals, dams, pipelines, plants for water supply, educational institutions, hospitals, etc. & sub-contractor thereof.
Food /drinks at restaurants with AC/heating
Outdoor catering
Renting accommodation for more than Rs.2500 but less than Rs.5000 per day
Supply of food, shamiana, and party arrangement
Supply of works contract
28% Tax Slab
Entertainment events-amusement facility, water parks, theme parks, joy rides
Food/drinks at AC 5-star hotels
Accommodation in 5-star hotels or above
