In recent times, if you have come over to any message on your phone stating that ‘paying utility bills with your credit card will result in double taxation under Goods and Services Tax‘, it is just a rumour; you do not have to worry about it. The government of India has clarified about such information is false news.
Hasmukh Adhia, the Indian Revenue Secretary at the Ministry of Finance, tweeted that a false message has gone viral on social media stating that if you pay your utility bills with your credit card, you have to pay double GST. This is false information. Please check such messages with the authorities before circulating them with the masses.
Moreover, A P Hota, National Payments Corporation of India’s Managing Director has told a local newspaper that apart from the GST of 18% which was replaced with a 15% service tax, there will be no charge for credit card payments. And, 18% GST is not applicable for credit card transactions.
Who Has to Pay Tax on Transaction Fees for Credit Card Payments?
18% rate will be taxed from transaction fees of the purchase, and it is only applied to the merchants who offer swipe machines for payments. For getting the credit card transaction accepted by the bank, the merchants pay Merchant Discount Rate (MDR) to banks. For example, for every MDR of Rs 100, the merchant would have to pay Rs 18 under GST instead of Rs 15, its previous rate.
Is GST Applicable for Credit Card Transactions?
Now, as a consumer, you are not required to pay the tax related to your purchase for the merchant. Therefore, there is no GST applied for credit card transactions. On the other hand, there is GST applied if you fail to make the credit card payments on time. So, keep a tab on your credit card bills and kindly pay them in advance to overcome situations like these.
Will GST Apply to Banking Services?
However, one thing to keep in mind is that all your banking services will now be charged under GST at 18%, 3% more before GST (15%). It includes ATM withdrawal, locker fees, debit cards, cash handling services and home loan processing fees. It works similar to that of service tax as GST will only be applied for banking services.