If you are worried about the impacts of GST on your credit card bills, it’s about time you put all the rumours to rest and dig deeper.

Ever since the government has implemented GST (Goods and Services Tax), there have been several apprehensions about its impact on commodity prices. In general, business owners approve of GST as it is going to consolidate different taxes into a single tax structure and, thereby, streamline the taxation process. One of the concerns for the middle class is about its impact on their Credit card bills.

It should be noted that the idea of implementing GST is not new. There has been ongoing efforts to bring a uniform tax regime since 2000s. GST was implemented only after a thorough study of its impacts on the economy. In simple terms, it is an indirect tax on goods and services, which will replace all existing taxes levied by both state and central governments.
Myths around GST on Credit Cards

If you are worried about the impacts of GST on your credit card bills, it’s about time you put all the rumours to rest and dig deeper. If you remember the pre-GST era, service tax was charged by banks only on annual subscription fee and interest payments, and not on normal credit card transactions. The same holds true even today; if a user delays his credit card payments, only then he is liable to pay extra taxes. The only change to this effect is that after the implementation of GST, the service tax on credit cards has been revised from 15% to 18%. That’s an increase of exactly 3%.

But that extra tax applies only if someone defaults on regular credit card bills. Credit card bills paid on time attract neither interest nor any taxes. So, avoiding GST on credit card bills is easy. If you don’t want to lose money on unwanted taxes, just make sure to clear all your dues on-time.

Another misconception around credit cards is that GST will substantially increase service charges on utility bills. In fact, many believe that when credit card is used to make payments for utility bills such as electricity, gas, telephone etc. GST is levied twice; once as a service charge on the utility bill by the provider and again on the total amount billed by the credit card issuer. This concern is prohibiting many consumers from using their credit cards for utility bill payments. However, these concerns are completely unfounded. GST is not charged on the amounts billed by the credit cards, including the payments made towards utility bills.

GST for Nation Building

A deeper understanding of GST should provide more confidence on this newly implemented tax reform. It is a multi-sword weapon for economic growth and is equally beneficial for consumers, businesses and governments. In particular, GST is beneficial for consumers as it will cut down on double taxation as well as reduce induction of unwanted taxes on goods and services. Even for businesses, there are multi-fold benefits. GST will minimise cascading effects of tax and decrease ineffective tax rates on goods and services. Moreover, businesses will have to be more compliant on tax payments and maintain records of sales and receipts.

An accountable tax regime goes a long way in boosting nation’s economy. GST is touted to play the same role in India. With GST in practice, the government will have the advantages like increase in tax collection with a wider tax base, consolidation of multiple central and state taxes, improved tax to GDP ratio, and finally, much better and effective mechanism to handle tax evasions. However, the customer will be charged for any commodity in the same manner as before. Similarly, the amount spent on credit card will not attract any new taxes because of GST.

There lies no doubt that implementation of GST will bring down much of our daily expenses. Non-overlapping taxes will also increase nation’s competitiveness in global markets.

So, if you are still worried about applying for a credit card and thinking that GST will bring havoc to your savings, we must reassure you that such worries are simply unwarranted. Much of the rumors around GST are getting cleared as people start embracing this new tax structure. Be assured, GST is not going to bring any significant changes to your credit card bills.

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