The One Nation, One Tax concept of GST (Goods and Service Tax) is a revolutionary one. It can transform the entire taxation structure on the country. GST affects goods and all kinds of services. The name “Goods and Services Tax” signifies that all sorts of products and services come under GST.
The banking sector provides many services that were taxed at around 15% in the previous Service Tax regime. The implementation of GST has resulted in the enhancement of the service tax from the existing 15% to 18%. Therefore, it affects all services of the bank wherever there is a tax component.
| Bank | Interest Rate | Tenure | EMI (Per lakhs) | Disbursed |
| HDFC Personal Loan | 10.75% | 5 Years | Rs. 2,162 | Instant Disbursed only for HDFC Customer |
| ICICI Personal Loan | 11.25% | 5 Years | Rs. 2,149 | 3 to 4 days |
| SBI Personal Loan | 9.60% | 5 Years | Rs. 2,105 | 5 to 7 days |
| PNB Personal Loan | 8.95% | 5 Years | Rs. 2,073 | 5 to 7 days |
| Bajaj Finserv Personal Loan | 13.50% | 5 Years | Rs. 2,301 | 24 Hours |
| Tata Capital Personal Loan | 11.99% | 5 Years | Rs. 2,224 | 5 to 7 days |
| Indiabulls Personal Loan | 13.99% | 5 Years | Rs. 2,326 | 24 Hours |
| Citibank Personal Loan | 9.99% | 5 Years | Rs. 2,124 | 5 to 7 days |
| Yes Bank Personal Loan | 10.75% | 5 Years | Rs. 2,162 | 5 to 7 days |
If you are planning to apply for a personal loan to cater to any of your financial needs, let us look at how GST impacts the Personal Loan deals.
Personal Loans are the easiest of loans requiring the minimum of documentation. The eligibility criteria are also straightforward. There is no need to maintain collateral. Hence, there is no need to incur expenses like the creation of charge and other costs that attract service tax.
The implementation of GST does not have much effect on the Personal Loans because the only area of impact is the processing fee structure. In the previous regime, the service tax on processing fee was 15%. With the implementation of GST, the tax burden on the service charges has enhanced to 18%. It implies that there is an increase of 3% on the Personal Loan processing fees.
At present banks charge around 2% of the loan amount as processing fees. Hence for a loan amount of 5 Lakhs, you incur 10,000 as processing fees. Under the service tax regime, you used to incur a service tax of 1,500. Now, with the implementation of GST, the rates have gone up to 18%. Hence, you incur an amount of 1,800 as service tax. Therefore, you can see that it affects your total outlay by 300.
The GST does not have any effect on the interest charged on your Personal Loans and all other loans as well. Hence, there is no effect on the EMI (Equated Monthly Instalment). However, it affects other charges such as prepayment penalties, late payment fees, foreclosure charges, and so on.
The prepayment penalties are around 2% to 5% of the payment amount. There is a GST component on this prepayment. Similarly, the foreclosure amount attracts penalties in the range of 2% to 5%. These charges attract GST as well. Hence, the implementation of GST affects the Personal Loans in these aspects. So, if you wish to pre-pay or foreclose your Personal Loan, make sure you are aware of the charges involved for the same.
You can easily get Personal Loans today. Banks have various products for different categories of applicants. You can browse MyMoneyMantra, compare multiple Personal Loan deals and apply online.
If you meet the eligibility criteria, lenders are quick in sanctioning Personal Loans. Usually, it does not take more than 48 to 72 hours for the disbursement to take place.
You can compare the charges of various banks online. Some banks have low processing fees, but stringent prepayment and foreclosure charges whereas others have comparatively lower penalties on late payment of EMIs and so on. The GST affects these areas of your Personal Loans. Hence, you can compare and arrive at the right figure of GST.
You do not have to furnish collateral for your Personal Loans. Hence, you save on GST on charges connected with legal verification of documents, evaluation of security, the creation of a mortgage, and so on. Thus, one can state that the impact of GST on the Personal Loans is minimal.
For further clarification, you may speak with our Personal Loan Specialists.
Reshma Rawat is a passionate writer with a decade of experience in writing for a variety of domains (finance, technology, lifestyle, e-commerce, real estate, etc.). Currently, she is working as Assistant Manager - Content @MyMoneyMantra and writes blogs & webpages on financial products (loans, credit cards, insurance, government financial policies, mutual funds, etc.).
Director- MyMoneyMantra FinTech| A senior retail and commercial banking professional, adept at handling Business Development, Sales Planning & Growth, Product Strategy, Marketing Operations and Client advisory services phygitally.
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