# Banking & Financial Services - GST Exemptions

## Exempt Services

1. Extending deposits, loans or advances where the consideration is represented by way of interest or discount → EXEMPT

2. Inter-se sale or purchase of foreign currency amongst banks or authorised dealers of foreign exchange → EXEMPT

## Taxable Services (Common Misconceptions)

The following are TAXABLE even though they relate to banking/financial services:

Service charges, administrative charges, entry charges or charges for processing → TAXABLE
Any interest/delayed payment charges charged to client for delay in payment of brokerage, settlement obligation, margin trading facilities → TAXABLE
Late payment charges for outstanding dues on credit card → TAXABLE

## Settlement Through Cards (Acquiring Bank)

Services by an acquiring bank to any person in relation to settlement of an amount upto ₹2,000 in a single transaction transacted through credit card, debit card, charge card or any other card → EXEMPT

## Other Exemptions

Services provided by financial intermediaries in IFSC (SEZ) → EXEMPT

Worked example

### Example 1

Example 1: Mr. A pays his credit card bill late and is charged ₹500 as late payment fee. Is GST applicable?

Answer: Yes. Late payment charges for outstanding dues on credit cards are TAXABLE under GST.

### Example 2

Example 2: Customer pays ₹1,800 to a merchant through credit card. The acquiring bank charges the merchant a fee.

Answer: Since the transaction value is up to ₹2,000, the services by the acquiring bank are EXEMPT from GST.

### Example 3

Example 3: Bank X gives a loan of ₹10 lakhs to Bank Y at 7% interest. Is the interest taxable?

Answer: No. Interest on loans/deposits where consideration is represented by way of interest is EXEMPT from GST.

⚠️ Common exam mistakes

Assuming all banking services are exempt - only interest/discount is exempt; processing fees and service charges are taxable.
Thinking the ₹2,000 limit for card transactions is per-day or per-month - it is per single transaction.
Confusing inter-bank forex sale (exempt) with retail forex sale to customers (taxable).
Treating credit card late payment fees as exempt because they relate to credit - they are taxable.

Bare-Act text Entry 27 · Notification No. 12/2017-Central Tax (Rate) · click to expand

Services by way of extending deposits, loans or advances in so far as the consideration is represented by way of interest or discount (other than interest involved in credit card services).

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GST Exemptions - Banking and Financial Services

Worked example

⚠️ Common exam mistakes