The Calcutta High Court, while considering a writ petition by an individual, held that the Integrated GST is applicable on the interest component of the Equated Monthly Instalments (EMIs) of a loan advanced by a bank on a credit card as the same does not come within the purview of exempted services.
The borrower has filed this Writ petition praying for a declaration that the interest component of the Equated Monthly Instalments (for short “EMI”) of the loan granted by the respondent Bank is exempted from levy of Integrated Goods and Service Tax (for short “IGST”) and for a direction upon the Bank and the IGST authorities to refund the IGST collected from the petitioner.
The petitioner approached the High Court contending that grant of loan by the bank to the petitioner squarely comes within the meaning of “supply” as provided in Section 7 of the Central Goods and Services Tax Act, 2017 (for short CGST Act) and the interest component of the loan which is included in the EMI is the value of such supply of service of granting the loan. Such consideration for supply of service by way of granting loan cannot be said to be a credit card service merely because the EMI is indicated in the credit card statement. The petitioner argued that the services by way of extending loans by the bank in the instant case does not amount to credit card services.
Justice Hiranmay Bhattacharyya analysed the terms and conditions of the offer of loan dated February 21, 2019 and February 28, 2019 and observed that the said offer was valid only for customers holding a Citi Bank Credit Card issued in India and who avail of a loan on their card digitally.
“It further appears from the further communications dated February 21, 2019 and February 28, 2019 that Goods And Services Tax as notified by the Government of India is applicable on the initial interest amount, interest component of EMI, all fees and other charges and is subject to change as per relevant regulations of the Government of India,” the Court said.
Recalling its earlier decisions, the bench observed that “Since this Court has already held that the services rendered by the bank by way of extending loans to the petitioner in the instant case amounts to credit card services, the interest component of EMI of the said loan is nothing but interest involved in credit card services which is not exempted by notification no. 9/2017- Integrated Tax (Rate) dated June 28, 2017. For the reasons as aforesaid this Court holds that the interest component of EMI of loan advanced by the bank is not exempted under the said notification dated June 28, 2017. Thus, the second issue is answered in the negative and against the petitioner.”
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