The Goods and Services Tax or the GST came into effect on July 1st, 2017 and it has just started creating a stir in the country, the consumer economy, and especially among the business sectors. This new initiative by the finance minister is anticipated to enhance the entire procedure of tax collection and give a huge boost to the Indian economy. According to the latest news on GST, the personal finances of every individual will be impacted similarly.
You must be intrigued to know how the GST will impact your finances. So, here we bring forth a few areas that will be affected by GST and how you should adjust your financial strategies.
#1: Mutual funds
Goods and Services Tax will lead to a slight increase to the expense ratio which is charged by mutual funds for purposes of fund management. As per experts, managing funds will be considered as a service provided, and hence this used to be subject to 15% in service tax and now that the GST is here, it will be charged at 18%.
#2: Banking
All kinds of transactions like loan processing in India, credit card payments, fund transfers, and cash withdrawals will be a bit more expensive with 18% tax which has come into effect due to GST. But soon, the increase in tax collections will be normalized through input credit which can be claimed by the banks under the GST regime. Other services like fixed deposits and savings will stay as they are. You have to lower the number of transactions as this is the best way in which you can alleviate the blow from GST as it is coming on the customers.
#3: Insurance
As tax rates will go up to 18%, the costs that you have to pay in buying an insurance policy and maintaining it will even move up slightly. Taxes are going to be 18% in the first year for all individual term policies and even on the premium that is there for renewal. For every 100 Rs. that you pay towards your premium, you have to give away Rs. 18 as GST too. Previous insurance plans, the traditional ones which had service tax of 3.7% on the premium will have 4.5% in the first year of GST.
#4: Gold
Gold is going to become even costlier and there is another proposal for 3% taxes on gold and gold jewelry. They can even claim an input tax credit in the case of gold jewelry and this can be adjusted with the other taxes, as long as jewelers are concerned. If there are customers who sell back their gold to jewelers, they will not be able to get extra cost while buying the same again.
Therefore, if you’re worried about how the GST will impact your finances, you can take into account the above changes that it has brought to different areas of finances. Adjust the way you spend on things to stay on top of your finances.
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