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GST on Personal loans – Processing Fees, Documents, EMI

GST on Personal loans – Processing Fees, Documents, EMI

Last updated: May 11, 2022, 06:44 AM IST

A personal loan is an unsecured loan that can be availed for meeting various urgent fund requirements including medical expenses, travel, education, home care, and the like. As it can be availed easily online with basic eligibility criteria, personal loans have become a popular form for the masses. However, a borrower needs to be aware of the various taxes and charges on a personal loan like GST. 
 

What is GST?

 
The Government of India introduced the Goods and Services Tax (GST) – the country’s comprehensive tax reform – to simplify India’s tax structure by going in for one common tax system. Most industries fall under the purview of GST including the Banking and Financial Sectors. When introduced, the GST rate for the Banking and Financial sector was at 15%, which got increased to the current 18% GST slab. Being a charge on services, GST impacts personal loans.
 

GST impact on Personal Loans

Every borrower who avails personal loan has to pay GST charges at the existing rate of 18%. This GST charge applicable is in addition to the other personal loan charges of the lender. GST impacts other loan charges as seen below.
 

GST on Processing Fees, Documents & EMI

Lenders charge a processing fee for a loan granted to borrowers. This fee relates to the charge for the processing of a loan application, including a personal loan application. Normally, a processing fee is charged between 2% - 3% of the loan amount. GST at 18% is chargeable on the personal loan processing fees to be paid by a borrower.
 
GST is also applicable to the loan account statement charges. Likewise, it is also applicable to the foreclosure charges, i.e., prepayment charges for closing personal loans before maturity,
 
However, GST does not impact your monthly loan repayments like EMIs. GST does not directly impact personal loan EMIs as personal loan EMI did not attract service tax before GST implementation, as such, it does not attract GST now. So, a borrower’s personal loan EMI remains unchanged with GST’s impact on the personal loan.
 
A borrower who is self-employed and has a business loan as a part of the personal loan has to submit a copy of the GST certificate for documentation purposes.
 
Thus, it can be seen that GST levied on a personal loan impacts different aspects of a personal loan differently and may not impact all elements of a personal loan.
 
To know more about the impact of GST on a personal loan, check out credible loan apps like SimplyCash – powered by Hero FinCorp. SimplyCash is a fully digitized, user-friendly online loan platform, that provides an instant personal loan. You can easily avail of a personal loan at SimplyCash between Rs. 50,000 – Rs. 1.5 lakhs, at an attractive interest rate starting at 2.08% per month. It is an automated loan application with paperless KYC verification, SimplyCash provides its borrowers a seamless loan experience. On fulfillment of the basic eligibility criteria, you get the loan credited directly to your bank account within a business day.

SimplyCash

SimplyCash powered by Hero FinCorp is an instant personal loan app providing cash loans of upto INR 1,50,000 for both salaried and self-employed individuals. Driven by technology and fuelled by innovation, SimplyCash solves instant cash requirements of customers in just a few simple clicks without any physical documentation or meeting. The mobile app is available to users through all popular Android play stores like Google play store, Samsung store, Xiaomi store etc. With one of the most widespread presence, SimplyCash currently offers its services in over 90 major locations in India. Known for a seamless process, instant loan disbursal and transparent pricing - SimplyCash truly lives upto the expectations of being a 'Hero' product.  

Note: SimplyCash is a duly registered trademark and is a loan product offered, managed and operated by Hero FinCorp. Hero FinCorp Limited is a Non-Banking Financial Company registered under the provisions of Reserve Bank of India ("RBI") and is in the business of finance and lending.

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