Most bank service charges are taxed at 18% GST (SAC 9971) — account maintenance, ATM charges beyond the free limit, NEFT/RTGS/IMPS fees, cheque-bounce charges, card annual fees, processing fees and locker rent. Interest on loans, EMIs and deposits is exempt — there is no GST on the interest portion. UPI is nil for customers. Businesses can claim ITC on GST paid on bank charges used for business.
GST on Bank Services — Decision Table
GST rate for every common banking charge in India, and whether a registered business can claim Input Tax Credit.
| Banking Service | GST Rate | ITC (business) | Notes |
|---|---|---|---|
| Account maintenance / service charges | 18% | Yes | SAC 9971 |
| Loan / EMI interest | Exempt | — | Interest is not a taxable service |
| Loan processing / documentation fee | 18% | Yes | Fee, not interest |
| ATM withdrawal beyond free limit | 18% | Yes | On the charge, not the cash |
| NEFT / RTGS / IMPS charges | 18% | Yes | Nil on savings NEFT (RBI waiver) |
| UPI transfer (customer) | Nil | — | No charge to end customer |
| Cheque-bounce / return charge | 18% | Yes | On the penalty charge |
| Credit / debit card annual fee | 18% | Yes | Card interest itself is exempt |
| Locker rental | 18% | Yes | Renting-of-safe-deposit service |
| Forex conversion margin | 18% | Yes | Or optional flat scheme (Rule 32) |
| Savings / FD interest earned | Exempt | — | Depositor earns interest — no GST |
Financial services stay at 18% (SAC 9971) — the GST 2.0 two-slab reform effective 22 September 2025 did not change banking. Confirm on the official GST portal before invoicing.
Interest is Exempt — Only Fees Attract GST
The single rule that governs banking GST: interest and the money itself are never taxed; only the service fee a bank charges is. So your EMI has no GST on its interest component, but the loan's one-time processing fee does.
No GST — the interest & the money
- Home, car & personal loan interest
- EMI interest component
- Credit-card outstanding interest
- Savings-account & FD interest earned
- The principal / money transferred
GST applies — the service fee
- Loan processing & documentation fees
- Prepayment / foreclosure charges
- Account maintenance & SMS charges
- Card annual & late-payment fees
- Cheque-bounce & minimum-balance penalties
On a business loan of ₹10 lakh with a 1% processing fee, GST is 18% of ₹10,000 = ₹1,800 — charged once. The monthly EMI interest carries no GST at all. Delayed-payment penalties and prepayment charges, however, are fees and do attract 18%.
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ATM, NEFT/RTGS, UPI & Card Charges
GST always applies to the service charge, not the amount transferred. Free-limit transactions carry no charge and therefore no GST; UPI is free for customers, so there is nothing to tax.
- 1CustomerUses ATM / transfer / card
- 2Within free limit?No charge → no GST
- 3Bank levies a feeGST @ 18% on that fee only
- 4Business userClaims ITC on the GST
- ATM: free monthly transactions carry no GST; beyond the limit, ~₹20-23 per transaction + 18% GST.
- NEFT/RTGS/IMPS: the fee + 18% GST; online NEFT/RTGS on savings accounts is nil after the RBI waiver.
- UPI: free for end customers — no charge, so no GST.
- Cards: annual fee, late fee and cash-advance fee carry 18% GST; the interest on outstanding balance is exempt.
How GST Adds Up on Bank Charges
18% Loan processing fee
Exempt EMI interest
Running a business account? Reconcile bank-charge GST into your returns correctly.
Get Return-Filing Help →GST on Forex, Remittance & SWIFT
For buying/selling foreign currency, GST is 18% on the conversion margin (the buy-sell spread). Alternatively, banks may apply the optional flat scheme under Rule 32(2)(b) — a slab-based taxable value, so the effective GST on a transaction is small.
| Forex Amount Exchanged | Taxable Value (flat scheme) | GST @ 18% on that value |
|---|---|---|
| Up to ₹1,00,000 | 1% of gross (min ₹250) | 18% of the taxable value |
| ₹1L to ₹10L | ₹1,000 + 0.5% of excess over ₹1L | 18% of the taxable value |
| Above ₹10L | ₹5,500 + 0.1% of excess (max value ₹60,000) | 18% of the taxable value |
Rule 32(2)(b), CGST Rules. Outward remittance service charges and SWIFT charges attract 18% GST; the money remitted is not taxed.
ITC on Bank Charges — When Can a Business Claim It?
Banking services are not blocked under Section 17(5). A GST-registered business can claim ITC on GST paid on bank charges used for business, provided the credit appears in its GSTR-2B.
✓ITC available when
- Charges are on a business current/loan account
- A tax invoice / statement shows GST separately
- The GST reflects in your GSTR-2B
- The service is used for taxable business supplies
!ITC blocked / not available when
- Charges are on a personal account
- The bank statement does not show GST separately
- It is the interest portion (exempt — no GST to claim)
- Services used for exempt supplies (proportionate reversal)
Banking GST is easy to miss because it is buried in monthly statements. For a business, the ITC on account maintenance, processing fees, forex margin and card charges adds up — download the bank's GST invoice each month and reconcile it against your GSTR-2B so no eligible credit is lost.
- Rates & notifications: gst.gov.in
- CBIC rate finder: cbic-gst.gov.in
- Interest exemption: Notification 12/2017-CT(R), Entry 27 (services by way of extending deposits/loans where consideration is interest)
- Forex valuation: Rule 32(2)(b), CGST Rules 2017
Disclaimer: This guide is general information based on the law and notifications in force when it was last updated. It is not professional advice for your case — rates, thresholds and due dates change, so check the current position with the official source before you act on it.