Service tax on interest on loan against cr card



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


Something is missing in query. Service Tax can be on the value of any service and charging of interest is not service. in case there is any fee, processing charge etc for giving credit card service, the same attract service tax. Please re-check with the bank.


Something is missing in query. Service Tax can be on the value of any service and charging of interest is not service. in case there is any fee, processing charge etc for giving credit card service, the same attract service tax. Please re-check with the bank.

Tax Professional and in Service

With regard to personal loan, any interest charged by bank has been specifically excluded from the taxable value by virtue of Service Tax (Determination of value) Rules, 2006 and therefore, no service tax levied thereon. Further, activity of giving personal loan directly by bank is fall within the category of "Banking and other financial services" and if bank while discharging personal loan, if any processing fees/legal fees/other charges other than interest charged on you, they need to recover service tax on all those ancillary charges under "Banking and other financial services" category.


Secondly, loan given against credit card by bank even though we call it as loan, service tax law called it as credit card services and since, interest on loan under credit card facility/service is not under the exclusion list for service tax, all credit cards needs to charge applicable service tax rate for all the charges including interest on loan given against card.


Hope this solves your query.


Thanks and Regards,

Manoj B. Gavali


Hi. Mr. Manoj,


I have took a loan on Credit Card in mid 2015 and now in Nov 2016 bank told me that i have to bear the cost of S.Tax on Interest part. i am unable to understand as per the Section 66 D S.Tax law state that the Interest in under financial services so no will be cheargeable to tax even in sec 65, where the board decide the chargeability it cleary mentioned the below services but i did not found any section where i can co-relate the same with S.Tax Rules.


Can you please put some light on this issue for my better clarity also please suggest why bank does not charge the S.Tax till date if the S.Tax Need to be charge.


Refer the below link or the data provide for your ready reference.;jsessionid=2B8EA35E459BA3B7BB8A768DDA97CAE0


[(33a) "courier agency" means 4 [any person] engaged in the door-to-door transportation of time –sensitive documents, goods or articles utilising the services of a person, either directly or indirectly, to carry or accompany such documents, goods or articles; “credit card, debit card, charge card or other payment card service” includes any service provided,— (i) by a banking company, financial institution including non-banking financial company or any other person (hereinafter referred to as the issuing bank), issuing such card to a card holder; (ii) by any person to an issuing bank in relation to such card business, including receipt and processing of application, transfer of embossing data to issuing bank’s personalisation agency, automated teller machine personal identification number generation, renewal or replacement of card, change of address, enhancement of credit limit, payment updation and statement generation; (iii) by any person, including an issuing bank and an acquiring bank, to any other person in relation to settlement of any amount transacted through such card. Explanation.—For the purposes of this sub-clause, “acquiring bank” means any banking company, financial institution including nonbanking financial company or any other person, who makes the payment to any person who accepts such card; (iv) in relation to joint promotional cards or affinity cards or co-branded cards; (v) in relation to promotion and marketing of goods and services through such card; (vi) by a person, to an issuing bank or the holder of such card, for making use of automated teller machines of such person; and (vii) by the owner of trade marks or brand name to the issuing bank under an agreement, for use of the trade mark or brand name and other services in relation to such card, whether or not such owner is a club or association and the issuing bank is a member of such club or association.

Asst. Manager - Finance

Dear Manoj B Gavali,

I have gone through your second paragraph on charging ST on interest component of the credit card loan EMI.

I have also gone through the link given by Mr. Saurabh Bharadwaj for definitions

But no where it is mentioned that Credit Card Loan interest EMI is charged to Service Tax

I got a communication from Citibank saying they have been specifically issued a notification to charge service tax on interest portion of Credit Card loan EMI and sent a request to share it to me

Sr.Accounts Executive

Dear Devaraj Rao,


I have also taken a loan on Citibank Credit card and I have been tired of writting to Head customer care and not got the satisfactory answer. All this while they have replied mentioning "Service tax has been charged in line with industry practice".


Please share the notification if you receive from Citibank.


Same thing happened with me. I have filed a consumer Court case for unfair trade practice

Dear Mr. Kishore, did you get any response on your case? please update. Thanks



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