Higher service tax to make banking services costly
Banking services such as ATM transactions, debit
cards, credit cards, processing of demand drafts and
even deploying security guards at ATMs and bank
branches will cost more after the service tax was
hiked from 12.36% to 14% in the Union Budget
presented by finance minister Arun Jaitley on
Saturday.
And if the proposed tax to keep
India clean -- the Swachh Bharat cess – is included,
then the effective service tax for the common man
would be more pinching at 16%.
Though the government has not yet made it clear what
services would attract the clean India tax but a tax
expert at a leading consultancy firm said that
Swachh Bharat cess is likely to be rolled out across
all services given that it is the flagship programme
of prime minister Narendra Modi.
Arundhati
Bhattacharya, chairman, State Bank of India, told
dna, "The cost of banking services like ATM debit
and credit card transactions is going up but it is
difficult to quantify how much will be passed on to
the customer. Even the cost of maintaining security
will go up with the service tax being hiked. We need
to study the impact of the additional cost, before
we can quantify how much will be passed on to the
customer." |
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ATM security was a big
issue after an attack on a woman in a Bangalore ATM was
caught on the CCTV. Banks were beefing up security. But
with the added cost of employing security guards, banks
may think twice before strengthening the security.
Arun Tiwary, chairman and managing director, Union Bank
of India, said, "Though RBI had capped the number of
free ATM transactions at five, we were giving eight
transactions free for our customers. We may bring this
down to five if the costs are really pinching us. But I
am not sure how much of the added cost is there on our
books. Our technical committee is studying the impact."
Jaitley in his budget speech had asked everyone to own a
Rupay card, the indigenously developed debit card. He
promised that each card holder would benefit from it.
But what the government intends to give with one hand is
being taken away from the other hand, by making all
electronic transactions more expensive.
The
central bank and the government are also aiming for a
cashless society by incentivise everyone to migrate to
electronic payments. But the additional cost levied on
cards will act as a disincentive. Even for companies,
the issue of letter of credit, overdraft facilities, etc
would attract additional taxes.
The government says the hike in service tax is to
prepare people to migrate to goods and services tax
(GST) when the services tax could go up to 18%. Economic
Survey by the government released a day ahead of the
budget said Constitutional amendment bill to implement
GST also needs to be enshrined in legislation first by
Parliament followed by ratification by the states. "A
single GST rate (across states and products) set at
internationally competitive levels with limited
exemptions would maximize its pro-growth,
pro-compliance, and pro-single market creating
potential," the Survey had said.
Source:::
Daily News & Analysis , dated 03/03/2015......... |