How Goods and Services Tax Has Affected Business Loans

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Both houses of Parliament approved the four bills about GST in April. The buzz surrounding GST has been a big one since its arrival and why not, it has impacted every sector in the market. The government introduced GST with a view of integrating market to facilitate easy business. The GST Council is working towards providing flexibility to the states with regards to tax range.

Every sector has witnessed a considerable common impacts of GST on Business , which includes the financial institutions. The banking sector falls under the 18% tax bracket as compared to earlier 15%. Due to these introductions, various services that are provided by Non-Banking Financial Companies (NBFCs) and other lenders have now been affected in some way or the other. The different types of loans such as auto loans, home loans, personal loans and business loans have experienced considerable changes. However, that is not it; the business loan facility is expected to be impacted by GST. Talking specifically about business loans, the government is expecting a boost in tax revenue along with easy business provision.

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Impact of GST on Business Loans:

GST will make the business loan sector slightly expensive. It is mainly because of the governments’ decision to levy 18% tax rate instead of earlier 15%. However, the good news here is that the service tax will only be levied on miscellaneous charges and not the EMIs. Thus, the amount that is to be paid under processing fee and tax attached to it will be slightly higher.

However, it is just a small drop in an ocean full of benefits that are bound to arrive with GST. The small increase will not stop people from taking business loans. These increased processing charges become negligible when you consider a long-term framework. Apart from that, there are several reasons why GST will have a massive impact on business loans. Thus, here are a few things that every business owner needs to know:

  • Simple Tax System

GST was being waited upon eagerly by the masses mainly due to this reason. People are tired paying multiple taxes and so is government levying them. Instead, the government wants to make taxation quite simpler. The market for a long time has felt the need for a reduced paperwork and complexities relating to accounts and taxation. With GST, the tax system is much simpler now. It, in turn, will help in ensuring smooth functioning and even more, starting a business without worrying about the complexities. To add to this benefit, one should obtain a Business Loan from a Banks and NBFCs which helps to make his/her business dream a reality.

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  • Competitive Pricing

Since all the other indirect taxes have been eliminated, the consumers will now be required to pay less tax. Especially business owners who faced major obstructions due to these taxes now have a stable business environment with simple taxation. Furthermore, there are various Non-Banking Financial Companies which are providing higher Business Loan disbursements thereby making business competition realistic.

  • Increase in Exports

With GST, the production cost is bound to decrease. Furthermore, the goods and services manufactured here will be priced competitively in the international markets. Thus, people who are in exporting business will witness the positive impact of GST. It will help them to compete with global manufacturers. It is important to note that lenders are making the most out of this situation as they have increased the disbursement amount. They are now providing higher commercial loans to business to take advantage of this potential growth. These are a few ways to which GST is affecting the business loan market.

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