Applicability on Credit Card Transactions

• GST is not levied on credit card purchases directly by the cardholder
  
• Goods/services bought using credit card are taxed as per usual GST rules
  
• The merchant charges GST on the invoice and remits it to the government
  
• The payment method (credit card) does not affect GST applicability
  
• GST may apply on certain fees charged by the issuing bank
  

GST on Credit Card Fees

• Annual fees, joining fees, late payment charges are taxable under GST
  
• Banks charge 18% GST on interest or service fees applicable to cards
  
• Processing charges on EMI conversion also attract GST
  
• GST applies to foreign exchange markups and statement fees
  
• These charges are mentioned in the credit card billing statement
  

Input Tax Credit for Businesses

• Business entities may claim ITC on GST charged for business-related credit card expenses
  
• The invoice must be in the company’s name and linked to taxable output supply
  
• Personal usage and expenses not eligible for ITC
  
• Banks and NBFCs can claim proportionate credit under Rule 42/43
  
• Proper records of expenses, invoices, and statements are essential
  

Merchant Payments and MDR

• Merchants accepting cards may pay Merchant Discount Rate (MDR) to banks
  
• MDR and other transaction charges are subject to 18% GST
  
• Banks or aggregators issue invoices for MDR charges to merchants
  
• GST credit is available to merchants for such charges if used for business
  
• E-commerce payments and wallet transactions follow similar norms
  

Regulatory Compliance

• Banks file regular GST returns and report financial services revenue
  
• GST collected from cardholders is included in outward supply returns
  
• Credit card issuers must issue GST-compliant invoices for fees and charges
  
• RBI and GST Council provide guidance on financial sector compliance
  
• Transactions must be carefully categorized to determine taxability