Service tax on interest on personal loan on credit card

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

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/