Impact of GST on Banking Services in India: Evaluating Public and Private Sector Banks using Interrupted Time Series Model
Author : Sutrishna Sarkar and Dr. Tanima Ray
Abstract :
The implementation of the goods and services tax (GST) in India in 2017 was an effective change cum reform in the indirect taxation where the previous system of Service tax was substituted with a single tax system. Whereas the banking industry is one of the most imperative sectors of the economy, there is a lack of empirical data about the effects of GST on banking services. This paper assesses the effects of GST on eight defined banking services of commission, exchange and brokerage, credit/debit card services, foreign exchange transactions, corporate guarantees, loan and advance interest, inter bank foreign currency transactions, Reserve Bank of India services and interbank transactions of the four major banks Punjab national bank (PNB), State Bank of India (SBI), Axis Bank and ICICI Bank. The study reported measures both the service-level changes and the comparative differences between the public and the privately sector banks using Interrupted Time Series (ITS) regression analysis on annual data carried out in 2010-2025. Results indicate that there are mixed results: some services, like FOREX, interest on loans, inter-bank transfers of foreign currency, and services by RBI are positively affected in terms of slope change, whereas corporate guarantees are negatively impacted, and card services are not significantly influenced. Comparative analysis helps in bringing to fore greater GST sensitivity at PNB and Axis Bank, selective exposure at ICICI and in case of SBI a shield. The findings provoke the revelation that effects of GST do not apply consistently across services or across types of institutions, and find its reflection in the taxation policy, compliance strategy, and competitiveness in the banking industry.
Keywords :
Goods and Services Tax (GST), Banking services, Public sector banks, Private sector banks, Interrupted Time Series (ITS) analysis.
