How Does GST Impact Your Personal Loan?

November 7, 2017by Team CapitaWorld0

The Goods and Service Tax was implemented to simplify and unify the tax system in India. Before GST, the complex and sometimes unregulated network of taxes made it difficult for businesses and individuals to keep track of fluctuating valuations of actual products and services. With the implementation of GST, the volatility of inflating prices was dampened with the implementation of a fixed tax amount.

Has the GST bill had any impact on Loans? In short, yes. In the procedure for applying for a personal loan, a service tax is applied on the processing fee amount. This processing fee is about 1% to 2% of the total loan amount. Suppose a person needs a Personal Loan of INR 1,00,000 he/she will have to pay a sum of 1000 to 2000 as the processing fee.

CapitaWorld - GST impact your Personal Loan

Before June 1, there was a service tax of 15% levied on the processing fee amount. That means, for a loan of 1 lac, a person would have to shell out rupees 1150 to 2300 as the processing fee (incl. tax), depending on the lender.

After the service tax was replaced by GST, the tax amount went up by 3%, making the overall applicable tax on processing fee 18%. So, post GST the total cost of processing personal loans has gone up by 0.03% to 0.06% of the total loan amount. This means that for a loan amount of, say, 5,00,000 rupees, the minimum processing fee to be paid is 15,000, instead of the pre-GST 12,500.

CapitaWorld - GST Impact on Personal Loan

Looks like in the Personal Loan segment, GST has had a slightly negative impact. The same procedure has come into practice for other kind of loans as well. The processing fees of Home Loans and Car loans have gone up by a bit. However, for Car Loan seekers, there is an overall advantage as the price of Luxury Cars is going down because of the application of GST in their manufacturing process itself.

Nonetheless, Personal loans remain the most sough-after kind of loans. They offer a flexibility of fund usage that simplifies the whole lending-borrowing affair. You can take personal loans to plan a vacation, to buy home theatre, to get by during your unemployment days, or even to pay off other loans. To avail a personal loan which suits your needs perfectly, visit

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