{"id":6391,"date":"2017-07-02T04:50:00","date_gmt":"2017-07-02T04:50:00","guid":{"rendered":"\/blog\/?p=6391"},"modified":"2025-02-03T15:29:24","modified_gmt":"2025-02-03T09:59:24","slug":"gst-bill-passed-a-benefit-or-barrier-for-the-loan-industry","status":"publish","type":"post","link":"https:\/\/tata-blog.osian.dev\/blog\/loan-for-business\/gst-bill-passed-a-benefit-or-barrier-for-the-loan-industry\/","title":{"rendered":"GST Bill Passed: A Benefit or Barrier For The Loan Industry"},"content":{"rendered":"\n<p>One of the most remarkable economic reforms so far, the Goods and Services Tax (GST) is an inclusive effort to bring the entire nation under a single tax system. It is a strategic attempt to accomplish the idea of \u2018one nation, one tax, one market\u2019. With GST coming into effect, there has been a buzz about how it will affect the overall economy and specific businesses.<\/p>\n\n\n\n<div class=\"wp-block-button aligncenter\"><a class=\"wp-block-button__link has-background has-vivid-cyan-blue-background-color\" href=\"https:\/\/tata-blog.osian.dev\/business-loan.html\">Know More<\/a><\/div>\n\n\n\n<p>So, what led to the formulation of\nthe GST structure? The earlier taxation system was mainly divided into two\nmajor categories- Direct Taxes and Indirect Taxes (Excise Duty, Sales Tax,\nLocal Body Tax, Custom Duty, and Service tax). The several indirect taxes\ncomplicated the whole taxation system and also resulted in increased cost of\ngoods and services. This complicated tax system was becoming a barrier to the\nprogress of the economy.Additionally, it was also essential to consider the\nentire country as one market, for which uniformity in tax was a prerequisite.\nPaying heed to these necessities, the government formulated the GST, under\nwhich the indirect tax mechanism was simplified by subsuming multiple taxes at\nCentral Level and State Level. The government has categorically divided all\ngoods and services under five tax slabs \u2013 0% (no tax), 5%, 12%, 18%, and 28%;\nand these will be applicable and remain constant throughout the country,\nthereby bringing in tax uniformity across the nation. <\/p>\n\n\n\n<p>Indeed, this reform has impacted\nevery sector of the economy and so is true for the banking and finance sector\ntoo. In the GST structure, the banking and financial sector has been\ncategorised under 18% tax slab as against the earlier 15% service tax.So, let\u2019s\nsee how this increase of 3% will impact the loan segment of banking and\nfinancial industry. It is opined that EMIs for a home loan, auto loan, and\npersonal loan will not get affected as service tax is not levied on them, but\nfew miscellaneous cost such as loan processing fee, prepayment charges etc.\nwill invariably go up as they attract service tax. For instance, there is no\nservice tax levied on personal loan per se, yet the processing fee and\nprepayment charges for this loan will now attract 18% service tax. So, the\nprocessing fee will be computed as 1%-2% of the loan amount + 18% service tax;\nand prepayment charges will be computed as 2%-5% of the outstanding loan + 18%\nservice tax. Similarly, for a car loan, the processing fee will be1%-2% of the\nloan amount + 18% service tax; and prepayment charges will be 2%-6% of the\noutstanding loan + 18% service tax. For home loans, the processing fee will be\n0.25%-1% of the loan amount + 18% service tax. For prepayment, the floating\nrate home loans do not bear any charge. But, the prepayment charges of fixed\nrate home loan will be 2%-3% of principal outstanding + 18%.<\/p>\n\n\n\n<p>Further, banks and non-banking financial companies anticipate a rise in demand for business loans due to the much-needed respite provided by the GST to this sector. The implementation of GST will ensure ease of doing business by subsuming multiple taxes, reducing production cost, reducing logistics cost, and by improving market expansion and removing area based exemptions. These factors will not only simplify and bring transparency in conducting business but will also encourage starting a new business and expanding existing ones \u2013 indicating that more small and medium enterprises will seek for a business loan. A <a href=\"https:\/\/tata-blog.osian.dev\/business-loan.html\" title=\"Business Loan\">business loan<\/a> can be applied online and can be utilised for various business purposes, such as expansion, infrastructure, working capital, and other business requirements.  Finally, compared to earlier 15% service, the new 18% tax slab is indeed an increase, and it gives an impression of the rise in loan cost, but the actual calculation definitely does not burden the borrower\u2019s pocket. So, with GST coming into effect the loan industry might not see a slowdown. <\/p>\n\n\n\n<div class=\"wp-block-button aligncenter\"><a class=\"wp-block-button__link has-background has-vivid-cyan-blue-background-color\" href=\"https:\/\/tata-blog.osian.dev\/online\/loans\/business-loans\/home\">Apply Now<\/a><\/div>\n","protected":false},"excerpt":{"rendered":"<p>One of the most remarkable economic reforms so far, the Goods and Services Tax (GST) is an inclusive effort to bring the entire nation under a single tax system.<\/p>\n<p><a href=\"https:\/\/tata-blog.osian.dev\/blog\/business-loan\/gst-bill-passed-a-benefit-or-barrier-for-the-loan-industry\/\">Read More<\/a><\/p>\n","protected":false},"author":1,"featured_media":6392,"comment_status":"closed","ping_status":"closed","sticky":false,"template":"","format":"standard","meta":{"inline_featured_image":false,"footnotes":""},"categories":[26],"tags":[],"class_list":["post-6391","post","type-post","status-publish","format-standard","has-post-thumbnail","hentry","category-loan-for-business"],"yoast_head":"<!-- This site is optimized with the Yoast SEO plugin v20.13 - 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