On Macro Levels
The adaptation of the GST framework was not just a shift in business and legal paradigm but involved enhancement of the country’s overall economic goals. The intent to bring business under a uniform framework was a much welcomed step but the government had a daunting task of bringing the country up to speed with the new tax regime with the launch of the GST portal. The larger goal of broadening the tax base has certainly hit the right chords with the Economic Survey 2017-18 showing that there were 9.8 million new GST registrants. This reflects that despite compliance-related complexities for businesses, the government has been able to get a head start in implementing the uniform tax regime.
On Financial Services (Consumer POV)
The GST implementation did not bring about any major inflation in the economy over the last one year. So, lending and borrowing rates have only increased marginally, contributing to a lot of stability.
The consumers saw a small increase in costs of purchasing financial products and availing financial services. The GST rate of 18% was higher than the earlier 15% service tax slab. Services related to financial products like credit card, fund transfer, ATM transactions, processing fees on loans, etc. – all are now taxed at 18% post GST, up from 15% (service taxes @14.5% + KrishiKalyan cess and Swachh Bharat cess). However, the increases are marginal. For example, if you were paying Rs.100 + taxes towards a DD or a chequebook earlier, the charges after GST would increase by only Rs.3, from Rs.115 to Rs.118. Insurance premiums went up as well, as did the tax liability on the total expense ratio of mutual funds. Exit loads, too, now attract GST.
After one year, the implementation of GST has started to show its effects but being in a transitionary phase, there still remains gaps between expectations of the industry and actual implementation of the GST in terms of a simplified tax structure, ease of doing business and overall reduction in prices. However, overall, the sentiment is positive in terms of macroeconomic growth and digitalisation and from heron we should see the tax law evolve to become one of the largest contributors to the country’s overall tax pool.
[Adhil Shetty is CEO at BankBazaar]