Banking services to be costlier

 Banking services, except for the interest earned by the customers, are slated to become costlier with the advent of GST.

The GST Council on Friday finalised tax rates for services and pegged GST rate for telecom and financial services at 18%. “The current service tax people are paying is 15%. In GST it is pegged at 18%. So the banking services are slated to get costlier by almost 3%. Although, the banks will get credits under GST for goods used / consumed while providing the services. This should bring down the cost,” Naveen Rajpurohit, Partner of Indirect Taxes at BDO India said, adding that it is very unlikely that the banks will reduce the costs that will be transferred to the customers.

All the banking services — including credit cards, debit cards, demand drafts, locker services and barring interest — are taxable in the current regime, and it will remain same in the upcoming GST structure.

From the bankers perspective, Kishore Sansi, CEO and Managing Director, Vijaya Bank, said, “As of now we don’t want to do any guess work, but I would like to say all these service charges get transferred to customers. Ultimately the profitability of the banks is not impacted.”

Finance Minister Arun Jaitley on Thursday had said that while the overall basket of taxes will see a reduction, he hoped for greater tax buoyancy because of greater efficiency and less tax evasion.