GST on Banking Services — Bank Charges, Loan Interest & Forex
Updated: 3 June 2026 | CGST Act | SAC 9971 & 9954
Most bank service charges: 18% GST (SAC 9971). Loan/EMI interest is EXEMPT — no GST on interest. ATM charges beyond free limit: 18% GST. Forex exchange: 18% on margin or flat scheme. ITC available for businesses on bank charges used for business purposes.
EXEMPT
Interest on loans and deposits is exempt from GST — EMI interest, savings interest, FD interest: no GST.
GST applies only on fees and charges (processing fee, annual fee, transaction charges) — not on the interest portion of any financial product.
GST applies only on fees and charges (processing fee, annual fee, transaction charges) — not on the interest portion of any financial product.
GST on Bank Services — Rate Chart
| Banking Service | GST Rate | Note |
|---|---|---|
| Account maintenance charges | 18% | SAC 9971 |
| Loan processing fee | 18% | — |
| Loan interest | Exempt | Not a service fee |
| ATM charges (beyond free limit) | 18% | On the charge amount |
| NEFT / RTGS / IMPS charges | 18% | NIL for savings (RBI waiver) |
| Cheque bounce charge | 18% | — |
| Credit/debit card annual fee | 18% | — |
| Locker rental charge | 18% | — |
| Forex exchange (flat scheme) | 1% of gross (min ₹250) | Optional scheme |
| Credit card late payment fee | 18% | — |
| UPI transactions | Nil (no charge) | Free for customers |
Frequently Asked Questions
What is the GST rate on banking services?
GST on banking and financial services: Most bank charges: 18% GST (SAC 9971). This covers: account maintenance fees, ATM charges, NEFT/RTGS/IMPS charges, cheque bounce charges, debit/credit card annual fees, locker charges, processing fees (loans). Interest on loans/deposits: EXEMPT from GST — interest income is NOT subject to GST. Exchange of currency: either 18% on transaction fee/margin or flat scheme: 1% of gross amount exchanged (min ₹250, max ₹60,000 per transaction). Life insurance premium: different rates (18% term/general, 4.5% endowment first year). Savings/current account: no GST on basic banking; GST only on fees charged. RBI, SEBI, insurance companies: classified differently under SAC.
Is GST charged on EMI payments and loan interest?
GST on loans: Interest on all loans: EXEMPT — no GST on EMI interest component. This includes: home loan interest, car loan interest, personal loan interest, credit card outstanding interest. GST IS charged on: Loan processing fee (1-3% of loan amount): 18% GST. Documentation charges: 18% GST. Pre-closure/prepayment charges: 18% GST. Delayed payment charges/penalty: 18% GST. Credit card: annual fee 18% GST; interest on outstanding balance — NO GST; late payment charge — 18% GST; cash withdrawal fee — 18% GST. Net: your EMI = principal + interest (no GST on interest) + processing charges (GST at 18% only on fee portion). EMI GST impact: visible only on one-time charges, not on monthly interest payment.
Is GST applicable on ATM transactions and NEFT/RTGS?
GST on transaction charges: ATM withdrawal — free transactions limit (5 at own bank ATM, 3-5 at others per month): No charge, no GST. Beyond free limit: ₹20-21 per transaction charged by bank + 18% GST on the charge. NEFT: charges vary (₹2-25 per transaction) + 18% GST. Online NEFT via internet banking: RBI has made NEFT/RTGS charges NIL for savings account holders (waived). RTGS: charges apply for large transactions + 18% GST. IMPS: typically ₹2-15 + 18% GST. UPI: free for end customers (0% charge, so 0 GST). Cheque bounce: ₹500-750 charge + 18% GST. SMS alerts: monthly charge + 18% GST. Minimum balance penalty: + 18% GST. Note: GST applies on the service CHARGE, not on the money transferred.
Can businesses claim ITC on bank charges?
ITC on banking charges: Yes — businesses (registered taxable persons) CAN claim ITC on GST paid on bank charges, provided: used for business purposes. Eligible: processing fees GST (loan for business purpose), account maintenance charges GST, NEFT/RTGS charges for business transactions. Not eligible: personal banking charges (no ITC on personal use). Bank must issue a tax invoice or statement showing GST separately. Condition: bank charges GST must appear in GSTR-2B. Reverse charge: if services from foreign bank — recipient pays GST under RCM. Financial services (banks as recipients of services): can set off ITC against their output GST liability. Blocked credit: Section 17(5) does NOT block ITC on banking services — banking services are generally eligible ITC.
What is the GST on forex exchange and money transfer?
GST on foreign exchange and money transfer: Currency exchange (buying/selling foreign currency): Option 1 — 18% GST on the spread (margin between buy and sell rate). Option 2 (optional flat scheme): Up to ₹1L exchanged: 1% of gross (min ₹250). ₹1L–₹10L: ₹1,000 + 0.5% of excess over ₹1L. Above ₹10L: ₹5,500 + 0.1% of excess over ₹10L (max ₹60,000). International money transfer (remittance): outward — sending money abroad: 18% GST on the service charge. Inward — receiving from abroad: if for trade/service: GST may apply; personal remittance: no GST on receiving. SWIFT charges: 18% GST. Travel card loading: GST on the exchange margin (flat scheme usually applied). Wire transfer fee: 18% GST on the fee.
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