GST rates: Banking transactions to get costlier

These are to come under the 18 per cent tax bracket along with other items and services such as AC hotels that serve liquor, telecom and IT services, branded garments etc.

With the roll out of the new Goods and Services Tax by the first of July this year heading towards becoming a reality, how this would affect the prices of everything and how much more or less would consumers have to pay has become the talk of the town.

Regardless of this, the very act of financial transactions is set to become costlier once the new tax regime comes into effect. As the transaction fees levied on financial services are likely to become more expensive as the government has put these under the 18 per cent bracket in the GST regime.

Such services would see a rise as they were till now taxed at a 15 per cent rate, and the hike means that for every banking transaction of Rs 100, each individual will have to pay Rs 3 more, tax experts have said according to reports.

According to a leading financial newspaper, Sachin Menon, partner and head indirect tax at KPMG, a financial services provider, said, "Financial institutions may be able to absorb this tax on behalf of companies which do bulk transactions but individuals will certainly have to pay more, though it is unlikely to have any large impact on demand."

The new tax regime sees 1211 items under various tax slabs in the new GST regime, with a broad range of tax rates between 5 and 28 per cent, with some essential goods including food items and other goods such as stamps, judicial papers, printed books, newspapers, etc are exempt according to the government announcements.

While a range of other goods and services are kept under the 18 per cent slab along with financial transactions. These include AC hotels that serve liquor, telecom and IT services, branded garments, flavoured refined sugar, pasta, cornflakes, pastries and cakes, preserved vegetables, jams, sauces, soups, ice cream, instant food mixes, mineral water, tissues, envelopes, notebooks etc.

Even insurance premiums will increase depending on the structure of various policies and how much of the premium given is deposited in terms of risk and how much is classified as a risk, Menon is reported to have said.

He added that banks will now also have to register their branches state-wise under the GST, unlike the current regime when they are registered through the banks' headquarters and this would initially increase the compliance cost for banks.

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