After the service tax notices were slapped on banks for non-payment of service tax on free services provided to their customers, there came in a clarification stating that free services such as withdrawal at ATMs, cheque book issuance upto a certain allowed limit will not attract GST. The Central Board of Indirect Taxes and Customs (CBIC) made it clear that no GST charges apply on services that are provided without consideration to other than a related or distinct person.
However some of the other set of banking and financial services will now come under the ambit of GST including delayed charges on loan repayment etc.
Here are discussed some such services that will now on attract GST charges:
1. Loan repayment default: In case you are being charged some penalty or interest fee for default in loan repayment, such charges will now on be subject to GST implications.
2. Late payment charges on credit card dues: When you miss on dues towards credit card outstanding, credit card issuing bank slaps some late payment charges on the credit card holders and these charges will now on be liable to GST.
3. Exit loads in case of mutual funds: Mutual fund houses charge a fee in case of redemption of units as exit load charges. And these exit load charges whether or not provided as a fixed percentage of investment will henceforth be charged under GST.
4. Sale of re-possessed asset: Also, as the sale transaction of a repossessed asset amounts to a supply, the transaction will be chargeable under GST.
5. Life insurance sold to NRIs: In a case when the life insurance policy is issued to a non-resident Indian, the GST implications arise as the payment is made in Indian rupees and not as convertible foreign exchange.
Also, lately there came in a recent clarification by the CBIC which is a fresh tax blow to small brokerages without NBFC arm as any amount earned as interest on margin funding to clients will be subject to 18% GST. The move is said to increase the cost of transaction for clients of these brokerage firms.