Service tax on interest on loan against cr card

Ravi Modi (Director) (98 Points)

14 May 2014  


I have applied for 5 lakhs Loan against Cr Card.  Since my Cr. Limit on Card was not sufficient the bank split the Loan Amount to  3 Lakhs against Cr.Card &  2 Lakhs as Personal Loan.  The Interest rate on Loan against Cr Card is 0.99% PM  & Personal Loan is 1.10% PM.    The EMI of  3 Lakh Loan is included in Cr. Card Statement whereas the EMI for 2 Lakh Loan is directly debited from my bank.

Now the bank is charging 12.36% Service Tax on Interest on Loan against Cr. Card,  whereas on Personal Loan there is no Service Tax.   Why there are two seperate rules for since both loans are similar.   How is loan taken against Cr. Card different from Personal Loan ?

Is bank doing right thing by charging S.Tax on interest ? 

Please give any reference to notifications from S.Tax Department stating that  S.Tax is chargeable on interest on loan against Cr.Card & personal loan interest is exempted from .


Ravi Modi