GST on credit card charges in India: 18% on fees, interest, late fees and forex markup
Which credit card charges attract 18% GST in India, why card interest is taxed while loan interest is exempt, how GST shows on your statement and how to calculate it.
On an Indian credit card, 18% GST is charged on almost every charge the issuer earns from you: the joining and annual fee, late payment charges, cash advance fees, forex markup, EMI processing fees and also interest and finance charges. Interest on ordinary loans is exempt from GST, but the exemption for interest expressly excludes credit card services, so card interest is taxed. GST is not charged on the purchase amount itself (the merchant handles GST on what you buy) or on your repayments. When you compare cards, add 18% to every fee and to any interest you expect to pay.
This guide belongs to the cashback vs reward points overview. It is general information, not tax advice.
Which card charges carry GST
| Charge | GST at 18%? | Note |
|---|---|---|
| Joining fee, annual fee, add-on fee | Yes | Shown as a separate GST line |
| Late payment charge | Yes | Levied only if past due for more than three days |
| Interest and finance charges | Yes | Credit card services are excluded from the interest exemption |
| Cash advance fee | Yes | Interest on the cash amount is taxed too |
| Foreign currency markup | Yes | On the markup, not on the spend |
| EMI conversion processing fee, foreclosure fee | Yes | Interest within the EMI is also card interest |
| Reward redemption fee, card replacement fee | Yes, where charged | Check the schedule of charges |
| Fuel surcharge | The surcharge and the GST on it may or may not be reversed under a waiver | Read the waiver terms |
| Your purchases | No GST from the card issuer | Merchant's GST is already in the price |
| Your repayments | No |
Why card interest is taxed
GST exemptions for financial services are listed in the government's exemption notification for services (Notification No. 12/2017–Central Tax (Rate), as amended). One entry exempts services by way of extending deposits, loans or advances where the consideration is interest or discount, but the same entry carves out interest involved in credit card services. So the issuer charges GST on card interest as it does on fees. Rates and notifications can change; the current text is on the CBIC GST portal.
How GST shows on your statement
Most statements show each charge and a separate tax line, often split as CGST 9% + SGST 9% if the issuer's billing location and your state are the same, or IGST 18% otherwise. The total is the same 18%. GST on charges also counts toward the total amount due; under the RBI directions, unpaid taxes and charges must not be capitalised for charging interest.
Worked examples (illustrative)
Annual fee. ₹999 fee + 18% GST (₹179.82) = ₹1,178.82.
Interest. Interest of ₹1,500 in a month + 18% GST (₹270) = ₹1,770.
Forex markup. ₹50,000 spent abroad with a 3.5% markup: markup ₹1,750 + GST ₹315 = ₹2,065, which is 4.13% of the spend. The forex markup calculator does this for any amount.
Late fee and interest together. Missing a ₹40,000 bill could mean a late fee (say ₹950 + ₹171 GST) and a month of interest (say ₹2,100 + ₹378 GST): about ₹3,599 of charges, more than the rewards on several months of spending.
Can you claim the GST back?
- Personal cardholders cannot claim input tax credit; GST is a pure cost.
- Businesses registered under GST that use a card for business may be able to claim input tax credit on the GST charged by the issuer, if the invoice or statement carries their GSTIN and other conditions are met. Ask the issuer how to register your GSTIN on the card account and speak to your accountant.
Reducing GST costs
GST is a percentage of charges, so the only way to pay less GST is to pay fewer charges:
- Pay the total amount due in full and on time.
- Choose a card whose fee you can waive with your normal spending; see annual fees and waivers.
- Use a card with a lower forex markup for travel; see forex markup and DCC.
- Avoid cash withdrawals on a credit card.
- Before converting a purchase to EMI, add GST to the processing fee and the interest.
Mistakes to avoid
- Comparing fees without GST: two cards at ₹499 and ₹590 might actually be ₹588.82 and ₹696.20.
- Thinking a "no-cost EMI" has no tax: if the discount offsets interest, GST on that interest may still appear on your statement.
- Expecting GST reversal on a fee reversed as a goodwill gesture — check that both lines are reversed.
Frequently asked questions
Is GST charged on the purchase amount I swipe?
Not by the card issuer. The merchant's GST is part of the price you pay.
Why do I see CGST and SGST on one statement and IGST on another?
It depends on where the issuer's supply is billed from relative to your state. The total rate is still 18%.
Is GST charged on cashback?
No. Cashback reduces what you owe; it is not a charge.
Will GST rates on card charges change?
GST rates are set by the GST Council and notified by the government. Check the CBIC GST portal for the current rate.
Sources
- CBIC GST portal — rate and exemption notifications for services
- GST Council — rate decisions
- Reserve Bank of India — card directions on charges and interest
