Highlights
- In the fast few days, banks have informed consumers that the tax burden on credit card bills will increase.
- Insurance companies too have told policyholders that tax burden will push up the premium,
- Even five-star hotels have sent out mails to customers.
Representative image
NEW DELHI: For some days now, several service providers — from insurance and banking to telecom and hotels — have been sending emailers to customers warning of a
GST-driven increase in prices+
starting July 1.
Alarmed and unconvinced, the revenue department in the finance
ministry has roped in other ministries to impress upon industry to
adjust input tax credit against possible increase in tax liability. The
tax credit being referred to will be on taxes paid on the purchase of
ACs and furniture used in the service providers’ offices.
In the fast few days, banks have informed consumers that the tax
burden on credit card bills will increase from 15% to 18% from July.
Similarly, telecom companies have said that monthly bills will rise as
the gains from input tax credit will not be be significant. The only
exception is state-owned Bharat Sanchar Nigam Ltd.
"Tariff will not be changed in the GST
era. They will be maintained. They should remain at the same level,"
the loss-making company’s chairman Anupam Shrivastava told TOI.
In fact, citing financial stress in the sector, companies such as Idea
and Airtel have pitched before an inter-ministerial group that telecom
should be treated as an essential service and face a lower GST of 5% or
12%, instead of the current 18%. When the rates were decided last month,
the government had said that the overall burden will not rise given
that input credit will be available to companies. It had pointed to the
telecom sector to argue that cost will reduce by 3%.
Insurance companies+
too have told policyholders that tax burden will push up the premium,
with the maximum impact will be on pure term insurance plans, where the
levy will rise from 15% to 18%. So, if your annual premium for a Rs 1
crore term plan works out to Rs 25,000, GST will result in a tax burden
of Rs 4,500, compared to Rs 3,750 currently. the impact will be lower
for Ulips, where insurers charge a fund management fee and mortality
charges. If your premium is, say, Rs 10,000 a year you currently pay Rs
75 as service tax, and GST will push up this liability to Rs 90.
"Term insurance will bear a higher burden when as a country we need
greater insurance penetration in the pure term insurance segment.
World-over such products are exempted from tax or it is limited to the
commission and reinsurance fee," said Neetu Gupta, vice-president for
taxation at Aviva Life.
Even five-star hotels have sent out mails to customers, some of them
to those have not stayed with them for years, announcing higher tax
burden, although the government had said that the overall incidence was
near existing levels, which includes service and state taxes.
The government is still not convinced with the argument being put
forward by service providers. "They should pass on the benefits of input
tax credit to consumers, which will reflect in lower cost. We will
request ministries to take up the matter with the service providers so
that consumers are not robbed of any benefit," said an officer.
23 Jun 2017, 05:48 AM