Earlier, services tax for financial services was 15 per cent which means a rise of 3 per cent.
Mumbai: From July 1, the government has implemented the much publicised Goods and Services Tax that charges all the financial services in country under 18 per cent tax slab. Earlier, the service tax rate for these services was 15 per cent. It means there is a 3 per cent rise in tax incidence on country's financial services.
According to media reports, revised tax rates wuld increase cost of a banking transaction which means customers will have to pay Rs 3 more for every Rs 100 withdrawn from ATM.
It may be noted that banking customers are at present giving 15 per cent service tax for depositing cash, withdrawal from ATM, credit and debit cards, insurance premiums and EMIs.
Due to increased service tax under GST regime for financial services, banking services like withdrawals from ATMs, requests for cheque books, cash deposits and issuance of demand drafts would cost more than it did earlier.
Revised tax rate under GST would also apply on servicing charges and yearly maintenance contracts that cost of which would be borne by the banks, according to a report in The Financial Express.
The Bharatiya Janata Party-led government headed by Prime Minister Narendra Modi broke from customary way of launching a public policy scheme. On midnight of June 30, it held a grand ceremony in Central Hall of Parliament to kickstart India's largest tax reform effective July 1.
State Bank of India (SBI) chairperson Arundhati Bhattacharya had shed further light on the tax rate for India's banking sector. She had told DNA newspaper that for all services provided by banks, cost of the service will be added to the service tax.
"Under the GST regime, this will get converted into the cost of the service plus the GST, which will go up from the existing service tax rate of 15 per cent to 18 per cent," she added.