BUSY is a simple, yet powerful GST / VAT compliant Business Accounting Software that has everything you need to grow your business.
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.
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.
| 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
Charges like minimum balance non-maintenance fees, SMS alerts, and statement requests attract 18% GST.
Loan processing, documentation, and foreclosure charges are all taxable at 18%. However, the interest on loan repayment is exempt from GST.
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.
If your bank charges a fee for RTGS, NEFT, IMPS, or UPI transfers:
| Service | GST Applicable? | Remarks |
|---|---|---|
| Savings account interest | No GST | Interest income is exempt |
| Fixed deposit maturity | No GST | No tax on interest earned |
| Loan interest repayment | No GST | Interest portion is exempt |
| Government banking services | Conditional | Exempt when directly provided to Govt. |
| 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 for all banking |
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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.
BUSY is a simple, yet powerful GST / VAT compliant Business Accounting Software that has everything you need to grow your business.