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India, on the road of development, has seen some major economic transformations in the past decade. The introduction of the GST system is one of them. Even though GST has been around for quite some time now, people still feel confused about how it affects their lives.One of the most asked questions in this light is on the impact of GST on personal loan. The impact is simple to understand, and the following points analyze the same in detail:
1. The processing fee is now 18% taxable:
The processing fees on personal loans was taxable at 15% before GST was introduced. Post that, the rate went up by 3%. This is one of the main impacts of GST on personal loan, i.e. revised taxable percentage on the processing fee is now 18%.
2. Additional document needed for a business personal loan:
Don't worry about how GST might have increased the documentation burden of getting a loan; it hasn't. The only change it has bought in eligibility is an additional requirement from individuals who are taking a personal loan for business. They need to present a GST certificate to get loan approval.
3. Taxable charges remain the same:
The EMI and principal amount in itself is kept isolated from GST. But other miscellaneous things do come under its purview. These include processing fees, bounce charge, penal interest, charges on the outstation collection, loan account statement charges, foreclosure charges, and part-prepayment charges.Again, nothing new has been added here, these charges used to attract taxes even before GST was introduced.
Conclusion:
One of the main reasons to bring in GST was to uniform the tax system and make everything more integrated. Thus, one of the impacts of GST on personal loan is that it has made understanding the tax break down easier. One no longer has to pay separate taxes on different components of the loan.While GST might have had a huge impact on the economic sector in general, luckily, getting a personal loan is mostly the same. The taxes have marginally increased (3% additional tax in the processing fee), making it a slight drawback. But on the whole, the impact of GST on personal loan is something that should not be a hurdle in your way of getting financial help. EMIs, eligibility and interest rates remain unaffected by it.
DISCLAIMER
The information contained herein is generic in nature and is meant for educational purposes only. Nothing here is to be construed as an investment or financial or taxation advice nor to be considered as an invitation or solicitation or advertisement for any financial product. Readers are advised to exercise discretion and should seek independent professional advice prior to making any investment decision in relation to any financial product. Aditya Birla Capital Group is not liable for any decision arising out of the use of this information.
