Go AD-Free with CAclubindia Pro with Daily WhatsApp Updates. Subscribe Now!

Service tax on interest on personal loan on credit card

ajay kumar jha (Consultant) (24 Points)

22 December 2016

Dear All, I had a personal loan of Rs. 4 lac from citibank on credit card. from nov 2016 citibank charging service tax @ 15% on interest portion please confirm is service tax is applicable on interest portion of emi of personal loan. i had asked bank to not charge service tax but they still charge service tax

Reply
Follow
Share

5 Replies

manisha (cs) (1118 Points)
Replied 22 December 2016

loan against credit card is costlier idea
as 8t attract servicevtax on interest portion
alwats chose direct loan though it is time consuming becz of formality but cheaper fron crdit card facilty
our govt treat both credit card paymnt of loan nd direct loan in 2 differnt way as per seevice tax angle

Upgrade to CAclubindia Pro. Subscribe Now!

manisha (cs) (1118 Points)
Replied 22 December 2016

join ETC educating tax and company law for more tax and company law query in fb group

ajay kumar jha (Consultant) (24 Points)
Replied 06 January 2017

Dear manish,

is any circular or anything else issued by government because as per negative list it is excluded.

if any circular etc available then please confirm

thanks

ajay kumar jha

manisha (cs) (1118 Points)
Replied 06 January 2017

upto 2000 govt waive swrvice tax on card transaction beyond it service tax charge search google for rest

jitender (Lawyer) (26 Points)
Replied 08 February 2017

Since the loan is provided against the credit card issued to the borrower by the bank, the EMI being charged to his credit card and subsequently recovered by the bank, the same is considered as a credit card service provided by some of the banks issuing such card to the card holder / borrower. The said service is classified under the taxable service category of the “credit card, debit card, charge card or other payment card service” (Clause (zzzw) of Section 65(105) of the Finance Act, 1994) as the same inter alia includes “any service provided by a banking company, financial institution including non-banking financial company or any other person, issuing such card to a card holder”.

Due to the above classification, the activity of providing a loan against a credit card is considered by such banks as providing credit card services rather than considering the same as lending or providing loan services to the borrower. Consequent to such classification and treatment by such banks, the specific exclusion provided on interest earned on loans by banks under the Valuation Rules are not made applicable when loan is provided against a credit card.

Hence, in the absence of any such specific exclusion of interest on loan provided under credit card facility, such banks are currently charging a service tax at 10.30% on the interest earned on the loan amount provided against the credit card, to the borrower / card holder.

Source:https://emicalculators.in/