New GST on Banking Services: Account, Loan, and Transaction Fees
From savings accounts to home loans and credit cards, banking is a daily part of our lives. But behind every transaction, there’s often a small tax charged—yes, we’re talking about GST. In this blog, we’ll simplify how the gst on banking services works, what types of charges attract GST, and how it impacts both customers and financial institutions.
Are Banking Services Taxable Under GST?
Yes. Under GST, most financial and banking services are considered taxable services, with a standard GST rate of 18%. Whether it’s maintaining an account, processing a loan, or transferring funds online, banks apply Goods and Services Tax (GST) on their service fees.
New GST Rate on Banking Transactions in India
The Government of India is updating GST rates effective after 22 Sep 2025. Below are the expected new GST rates for banking transactions (no compensation cess).
New GST Charges on Banking Transactions
| Banking Service | GST Rate | Tax Applies To |
|---|---|---|
| Account maintenance charges | 18% | Savings, current accounts |
| ATM withdrawal beyond free limit | 18% | Service fee portion |
| Debit card annual fees | 18% | Card issuance and renewal |
| Cheque book issuance (beyond limit) | 18% | Service fee on additional cheques |
| Loan processing charges | 18% | Personal, car, home loans, etc. |
| Credit card late payment/interest | 18% | Service fees (not interest component) |
| Net banking fund transfer (RTGS/NEFT) | 18% | If service fee is charged |
Also Know About – Financial Services SAC Code
GST on Banking Services in India: Breakdown by Category
Account-Related Services
Charges like minimum balance non-maintenance fees, SMS alerts, and statement requests attract 18% GST.
Loan Services
Loan processing, documentation, and foreclosure charges are all taxable at 18%. However, the interest on loan repayment is exempt from GST.
Credit & Debit Cards
Annual card fees, replacement card charges, and international transaction fees attract 18% GST. The gst on banking sector ensures all value-added services are taxed at the standard rate.
GST on Net Banking Transactions
If your bank charges a fee for RTGS, NEFT, IMPS, or UPI transfers:
- GST is levied at 18% on the service fee
- Digital transfers under UPI are often free, but corporate account charges attract GST
- Example: If a bank charges ₹5 for NEFT, GST = ₹0.90, Total = ₹5.90
Old GST Exemptions in Banking
(Old GST Rates – Applicable Until 21st September)
| Service | GST Applicable? | Remarks |
|---|---|---|
| Savings account interest | No GST | Interest income exempt |
| Fixed deposit maturity | No GST | No tax on interest earned |
| Loan interest repayment | No GST | Interest portion exempt |
| Government banking services | Conditional | Exempt when directly to Govt. |
Impact of GST on Banking and Financial Services
| Before GST | After GST |
|---|---|
| 15% service tax | 18% GST |
| Limited credit flow for banks | Full Input Tax Credit allowed |
| Complex tax structure (VAT + ST) | Unified tax system |
| Separate compliance for services | One GST regime |
Input Tax Credit for Banking Institutions
- IT services and software
- Office rent and furniture
- Professional services
- Courier, logistics, and printing
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Understanding the gst on banking services helps consumers be aware of charges and helps banks maintain accurate GST compliance. With almost all services moving online, GST now touches almost every interaction between a bank and its customer.
Hi there! I’m a Chartered Accountant with over 20 years of experience in financial accounting and a passion for writing. I enjoy simplifying complex topics like GST and income tax, believing that learning should be a lifelong journey. I'm here to share insights and make financial matters easier for everyone!
Frequently Asked Questions
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What is the GST on banking services in India?The standard rate is 18%, applicable to most service charges like processing fees, card charges, and account maintenance.
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Are all banking transactions subject to GST?No. Only services that carry a fee attract GST. Regular deposits, withdrawals, and interest are exempt.
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What is the GST on net banking transactions?18% GST is charged on service fees for RTGS, NEFT, IMPS, etc. If no fee is charged, no GST applies.
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Are loan EMIs taxed under GST?Only the processing and service fees attract GST. The interest component is exempt.
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How does GST benefit banks?Banks can claim Input Tax Credit (ITC) on input services used in their operations, improving credit chain efficiency.