gst on business loan

Impact of GST on Business Loan Interest & Its Processing Fee

December 05, 2022 • 1106 views
Author: PoonawallaFincorp Category: Business Loan

Standardisation of taxation was introduced by the government for the welfare and economic development of the country. There were various taxes that used to be levied by the Central and State Governments under various acts defined under direct, indirect, and other Tax laws. Over the years, there were many taxes that were abolished by the government such as interest tax, inheritance tax, gift tax, etc. Generally, taxes are categorized under direct taxes and indirect taxes. Further, these taxes are segregated as income tax, goods, and services tax, customs duty, service tax, central excise, etc. 

Introduction of GST 

GST was introduced in 2017 by the Government of India to eliminate several levels of taxes such as service tax, surcharges, state-level value-added taxes, central excise duty, additional customs duty, and octroi. GST is imposed on all transactions including sales, purchases, transfers, barter, lease, and import of goods and services. 0%, 5%, 12%, 18%, and 28% are five different tax slabs for GST. Commodities such as electricity, alcoholic drinks, and petroleum products are not taxed under GST. Furthermore, GST is further categorised as Central Goods and Services Tax (CGST), State Goods and Services Tax (SGST), and Integrated Goods and Services Tax (IGST). The introduction of GST solved the complex problem of multiple tax regimes that impacted the businesses and citizens of India. Also, it brought relief for the customers by reducing the multi-taxes on the same products and services.

Impact of GST on Business Loan 

With the introduction of GST, Business Loans have become slightly expensive. Earlier, Business Loan had a 15% service tax, and with the implementation of GST that has increased to 18%, and there is no GST on Business Loan interest rate. This has increased the processing fees making it a bit expensive for borrowers. However, in long run, the introduction of GST has made overall borrowing more streamlined, simplified, and efficient.

Also Read: Everything You Need to Know About GST on Loans

Why Should You Apply for a Business Loan? 

Irrespective of the charges and taxes, a Business Loan is beneficial when it comes to fulfilling the need for additional capital. It is one of the fastest and safest methods of getting funds needed for a business. There are various types of Business Loans that you can apply for such as Business loan for Working Capital, Business Loan for MSMEs, Business Loan for proprietorship, Business Loan for Women, etc. Below are a few more reasons why you should apply for a Business Loan right now:

  • Instant loan approval
  • Minimal documentation
  • Loan up to Rs. 50 Lakh
  • Competitive interest rates

Conclusion 

Undoubtedly, with the changes in the tax regime, there is an impact of GST on business loan fees and charges as it has increased overall costs for the borrowers. However, attractive features from lenders like Poonawalla Fincorp makes applying for a loan a much more pleasant experience.

As you don’t have to worry about GST on Business Loan interest rate, you can use Business Loan for catering to different needs such as buying day-to-day inventory, making miscellaneous payments, buying, or upgrading new machinery, etc. To know more about Poonawalla Fincorp’s product suite, you can visit our website.

Leave a Comment

Comments

No comments found.

Trending Topics



Contact Us logo Quick Apply CIBIL Score logo Free CIBIL Whatsapp logo Connect on WhatsApp