Loan facility to credit card holder not a credit card service, exempt from GST

The Hon’ble Calcutta High Court in Ramesh Kumar Patodia v. City Bank N.A. and Ors. [APO 10/2023 with WPO 547/2019 dated July 25, 2023] held that the loan facility availed by a credit card holder, where being a credit card holder is a condition for eligibility, is not considered a credit card service. Instead, it is treated as a standard loan which is exempt under GST. Directed the bank to refund the GST collected from the assessee.

Facts:

Mr. Ramesh Kumar Patodia (“the Petitioner”) is a credit card holder of City Bank (“the Bank”) has availed the exclusive loan scheme offered only to credit card holder of the Bank.

Both the parties have entered into an independent agreement for such loan and a fixed an Equated Monthly Installment (“EMI”) for next 12 months. The EMI consists principal amount, interest and GST.

Later, the Petitioner raised the issue with the Bank that the loan transaction and its interest was separate from the credit card service and thus cannot be leviable to GST as per Sl. No. 28 of the Notification No. 9/2017- Integrated Tax (Rate) dated June 28, 2017 (“the Notification”).

The bank contended that the Petitioner was granted the loan only because he was a credit card holder and granting the loan was part of credit card services being rendered by the Bank. Moreover, the agreement entered between parties clearly states that GST would be leviable on the interest amount charged.

The other Respondent (the Central Government) contended that the Notification exempted service except credit card services from GST and since the loan granted by the bank to the Petitioner constitutes the card service thus, it would be exigible to GST.

Issue:

Whether the loan facility provided exclusively to the credit card holder would be the considered as credit card service and thereby exigible to GST?

Held:

The Hon’ble Calcutta High Court in APO 10/2023 with WPO 547/2019 held as under:

Our Comments:

An applaudable judgement by Hon’ble Calcutta High Court, distinguishing the loan and the credit card services. The credit card holder who has availed such loan facility are advised to revisit their credit card statement and check whether bank has charged GST on such interest amount or not since, merely mentioning loan repayment EMI in the credit card statement does not make the facility of loan as a credit card services and thereby exigible to GST.

(Author can be reached at [email protected])

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