Expressing shock over the increase in Goods and Services Tax (GST) on chit fund services from 12 to 18 per cent, the Tiruchi District Financiers and Chit Funds Association has urged the Centre to withdraw the hike.
“The hike has come at a time when we were asking for exemption from GST for our services,” said association president B. Venugopal, secretary SP. Palaniappan and M. Thangavel, advisor, addressing a press conference here on Saturday.
The GST will impact on the return on the savings for those looking to save tax and the cost of funds will also go up. With reduced returns, those looking to save money may not opt to join chits, and chit funds will not be able to make available funds at low interest rates.
Chit funds largely cater to people of low and middle income groups and the hike will badly affect small businesses that are not able to access banking services, those looking to start new ventures and the self-employed. They will be forced to borrow money from private lenders at interest rates ranging from 36% to 60% per annum, the association office bearers contended.
Chit funds should be fully exempted from GST just as financial institutions are. The interests of chit funds, which promote systematic savings plan in a transparent manner and provide funds to the needy when required, should be protected so that they reach a large segment of people and encourage savings, they said and urged the Centre to set right the discrepancy in the levy of the tax on chit fund services and similar services rendered by banks, non banking financial companies and micro finance institutions.
