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Reality Check: How Much Would You Pay On Credit Card Post GST?

Adhil Shetty

From July 1, all the financial services have come under the ambit of Goods and Services Tax (GST). Following this, the new rates have marginally increased from the previous tax system. Since the implementation of the new tax system, many rumours and apprehensions have surfaced on social media.

Let us do a reality check.

Rumour mongering against GST

You may have received a message recently on social media that stated that you will have to pay GST twice if you pay your  utility bills with your Credit Card. There was another rumour doing the rounds that said, “If you use your Credit Cards post-GST, then you’ll have to pay tax on the whole billed amount.”

Don’t worry! These are just rumours and you must not pay heed to such messages. After the rumours went viral, the Government issued a clarification and asked people to refrain from circulating these messages. Revenue Secretary Hasmukh Adhia tweeted, “A wrong message is doing rounds on social media that if you make payment of utility bills by Credit Cards, you will be paying GST twice. This is completely untrue. Please do not recirculate such message without checking it with authority.”

It has been clarified by the government and financial experts repeatedly on several platforms that GST would be imposed only once and it would be charged in a similar way as it used to be done in the previous tax system. Only the tax rate has been increased to 18%. It was 15% under the service tax system.

How much you pay on Credit Card under GST?

A lot of people have confusion about how GST will be applicable on Credit Card bills. In terms of applicability, there is no difference between GST and its predecessor ‘Service Tax’ (ST).

As service tax was not calculated on the retail transactions, similarly there won’t be any GST imposed now. Service tax was charged at 15% on card fees, EMIs interest, late fees, processing charges, etc. Similarly, now GST would be applicable on all these items instead of service tax.

Let’s say, if you have purchased something on a 6 month EMI using your Credit Card. The total interest you pay in 6 months is Rs. 532, whereas the EMI processing fee is Rs. 150. Based on these assumptions, let’s check out the difference between service tax and GST implication on this transaction:

Service Tax Vs GST implication on Credit Card EMI
Detail ST @15% GST @ 18%
Loan Amount Rs 10,000
Interest Rate (Pa) 18%
EMI Tenure 6 months
Interest paid in 6 months 532 79.8 95.76
Processing charges 150 22.5 27
Total tax 102.3 122.76
* All figures are assumed

As it is clear from the table, you need to pay Rs. 20.46 extra under the GST format as compared with ST. The increase in tax payment is not very large.

The only difference with GST is that the tax rate will increase from 15% to 18%. Since the charges are not calculated on the amount you utilise using your Credit Card, but on the interest rate applicable, the implication of extra tax under GST would be minimal.

Finally, if you are getting confused by social media messages, then talk to your Credit Card company to get more information to understand the difference between GST and service tax. While you read more about GST, stay away from rumours that may lead you to commit a financial mistake.

(The writer is CEO,


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