The Indian economy is on the road to radical development. The Indian economy has witnessed major economic transformations. One of the key reforms witnessed has been in the taxation industry with the roll-out of the Goods and Services Tax (GST) model. The GST model has been widely implemented and executed across the nation. However, there are a couple of points which might help provide clarity on the impact of GST on areas like personal loans.

The purpose of the GST is to bring all the produced goods and services in India under the same umbrella for taxation purposes. The personal loans are one such component of the same. Since personal loans are collateral-free, they are the most preferred type of loans by borrowers for multiple purposes due to the high suitability. In recent times, the question of how does GST impacts personal loan interest rates has been widely asked. 

This article will shed some light and the following points will be easy to comprehend and analyse the impact in detail:

1. Revision in processing fees:

During the Service Tax era, the processing fees on personal loans was 15%. Post the GST implementation, the rate has shot up 3%, the revised taxable percentage on personal loans being 18%.

2. Requirement of an additional document when availing a business personal loan:

If you are worrying that there is a revised long list of documents for getting a personal loan post GST, then relax. The GST does not induce any additional burden of documentation while availing a personal loan. One factor that has witnessed a change is the eligibility – any self-employed borrower who needs to avail a business loan, which is a type of personal loan, will have to furnish a copy of GST certificate as a supporting document for approval.

3. No revision in taxable charges:

The principal and EMI amount are kept in isolation from the GST. However, the other miscellaneous charges do fall under the purview of taxation. There is nothing additional or new that is added to the list as these charges were taxable during the pre-GST regime as well. The charges included herein are as follows – processing fees, bounce charges, penal interest, loan account statement charges, charges on outstation collection, foreclosure charges, etc.

It is clear from the above that since GST has no impact on EMI or interest payment, the personal loan interest rates remain unchanged. With the help of a personal loan EMI calculator, you can arrive at the total charges payable along with the applicable GST. The personal loan EMI calculator helps you to plan your repayments and have a fair idea of the impact it will have on your pocket. The personal loan EMI calculator is available free of cost online which is quite convenient to use.

4. One Nation, One Tax principle:

The idea to introduce GST in the nation was to bring uniformity and integrate the wide taxation under the same umbrella. In fact, the impact of GST on personal loans is such that it has ensured a clear and easier understanding of the tax break down. An individual is no longer required to pay multiple taxes/ taxes on different components but just a single tax. This has eased off the burden from individuals and businesses to ensure tax compliances.

Conclusion:

As we observe, while the GST might have had wide impacted various other sectors of the economy, it hardly changes any component for getting a personal loan. Even though there is a slight drawback of the processing fees being hiked by an additional 3%, it does not bring any hurdle otherwise. The major components such as the eligibility, personal loan interest rates and EMIs remain unchanged. It can be concluded that the process and ultimate financial impact of personal loans remain unaffected and smooth.