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.

Are all banking transactions subject to GST?

No. Only services that carry a fee attract GST. Regular deposits, withdrawals, and interest are exempt.

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.

Are loan EMIs taxed under GST?

Only the processing and service fees attract GST. The interest component is exempt.

How does GST benefit banks?

Banks can claim Input Tax Credit (ITC) on input services used in their operations, improving credit chain efficiency .

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.

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GST Rates

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.

Madan Murari

Chartered Accountant

MRN No.: 509164

City: Patna

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

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.
Are all banking transactions subject to GST?

No. Only services that carry a fee attract GST. Regular deposits, withdrawals, and interest are exempt.
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.
Are loan EMIs taxed under GST?

Only the processing and service fees attract GST. The interest component is exempt.
How does GST benefit banks?

Banks can claim Input Tax Credit (ITC) on input services used in their operations, improving credit chain efficiency.

View all FAQs