Goods and service tax or GST, implemented on 1st July 2017 by the Government of India, aims to fulfil the one tax one nation approach. It brings all goods produced or sold and services provided in India into the ambit of taxation; personal loans being one of them. The impact of GST on personal loans is what every existing or prospective borrower should have a proper idea about.
Personal loans are one of the most preferred loans for borrowers because of its suitability for multiple purposes. It is also collateral-free. While it is a quick financing source, implementation of GST affects borrowers differently than it did earlier.
|Before the implementation of GST||After the implementation of GST|
|Features||No change||No change|
|Interest rate||Not affected by taxes||Not affected by taxes|
|Processing Fees||Among the personal loan charges, processing fees attracted a service tax of 15%.||Processing fees on personal loans attract a GST of 18%.|
|Eligibility Criteria and documents||Borrowers need to meet eligibility criteria and submit documents required by the lender.||No change in eligibility criteria after GST implementation. However, a self-employed borrower availing business loan, a type of personal loan, needs to provide a copy of GST certificate as a document.|
As GST on a personal loan is applicable in the 18% slab, the implementation comes with its own set of pros and cons.
The primary disadvantage of GST on personal loans is that it has increased the applicable tax by up to 3%, hence increasing the amount for personal loan fees & charges you pay.
Charges that attract taxes when availing a personal loan from Bajaj Finserv include –
So, when you use a personal loan part pre-payment calculator to know the charges payable along with the part-prepayment amount, it takes into account the applicable GST as well.
Hence, even with the impact of GST on personal loans, you can afford to avail the loan and pay the necessary fees.
Also, as GST does not impact interest or EMI payment, personal loan interest rates remain unaffected.
Apply for a personal loan with Bajaj Finserv and meet your immediate expenses without a significant tax burden. Make sure to use a personal loan EMI calculator before applying so that you plan your repayments.