Banking Services, Insurance Premiums to Cost More Under GST

Although the government has assured on numerous occasions that tax applicability on the majority of goods and services will remain the same before and after Goods and Services Tax regime, the reality is different.

Many industry stakeholders are unhappy with the new indirect taxation system as it has led to an increase in the prices of goods and services. Two such industries are the banking and insurance industry.

GST Impact on Financial Services

Before GST, customers were paying 15% tax on most of the financial services. However, these services that include but are not limited to ATM transactions, credit cards, loans, etc. have been put under the 18% tax slab in the GST regime.

A simple example of how GST has made banking services more expensive is the withdrawals at public sector State Bank of India. Earlier, when a customer withdrew money after four times, they paid a flat fee of Rs. 50 and a 15% service tax on top of it. So, if they withdrew Rs. 1 lakh they had to pay:

Rs. 50 + Rs. 15,000 = Rs. 15,050

However, in GST they would need to pay:

Rs. 50 + Rs. 18000= Rs. 18,050

In the similar fashion, other services have been affected as well. These include locker rentals, SMS alerts service, etc.

GST Impact on Insurance

Just like financial services, insurance services will also attract a higher tax rate of 18% under the GST regime from the previous 15%.

Considering that an average family spends about Rs. 20,000 per year on insurance premiums, they will now have to pay 3% or Rs. 600 extra annually.