GST on Banking & Financial Services — Fees 18%, Interest Exempt

No. Interest on loans, EMIs, fixed deposits, savings accounts and recurring deposits is fully exempt from GST. Interest is treated as a financial transaction, not a service, so no GST applies. The interest component of your home, car, personal or business loan EMI is always GST-free — only the processing fee, prepayment penalty or administrative charge on that loan carries 18% GST.

No. The GST 2.0 rationalisation effective 22 September 2025 restructured goods and services into a two-slab system but left banking service charges at 18%, unchanged since GST began. What did change is insurance: individual life and health insurance premiums moved from 18% to 0% (exempt) from 22 September 2025.

Yes. Once you exceed the free monthly ATM limit (typically 5 transactions at your own bank and 3 at other banks), the bank charges roughly ₹21 per withdrawal, which attracts 18% GST — an effective charge of about ₹24.78. The ATM fee is a banking service, not interest, so it is fully taxable. On a personal account this GST cannot be claimed as ITC.

Yes. Loan processing fees, documentation charges and administrative fees attract 18% GST. This is a one-time service charge levied at disbursal and is separate from interest. A business taking a business loan can claim this 18% as Input Tax Credit; individuals cannot recover it.

Yes. Prepayment and foreclosure penalties charged by a bank for repaying a loan early are a service fee and attract 18% GST. Because they are fees and not interest, the interest exemption does not apply. On a business loan this GST is eligible for ITC.

Yes. Bounce charges when an EMI mandate or cheque is dishonoured are a banking service charge and attract 18% GST. They are penal fees for a service, not interest, so they are taxable. For a personal loan this GST is generally not claimable as ITC.

The interest on an overdraft or cash-credit facility is exempt from GST, just like loan interest. However, the processing fee, commitment charge and renewal fee on the OD/CC facility are services taxed at 18%. A business can claim ITC on those service charges.

From 22 September 2025, individual life insurance premiums — term, endowment and ULIP policies bought by an individual — are exempt from GST (0%), down from the earlier 18%. This was announced by the GST Council under the GST 2.0 reforms. Group and employer-sponsored life policies remain at 18%.

No, not for individuals. Individual health and mediclaim insurance premiums are exempt from GST (0%) from 22 September 2025, reduced from 18%. The exemption covers individual policies and their reinsurance. Group health insurance taken by an employer for staff continues to attract 18% GST.

You pay no GST on the amount you invest in a mutual fund. However, the fund management fee (AMC charge) built into the scheme's Total Expense Ratio carries 18% GST, which is deducted from NAV. As this is an investment cost, not a business input, an individual investor cannot claim ITC on it.

Yes. SWIFT charges for international wire transfers (both sending and receiving) attract 18% GST. Forex conversion also carries 18% GST, calculated on the margin (the spread between the interbank rate and the rate charged to you) or a prescribed slab fee — not on the full amount exchanged. For export-linked transactions the treatment can differ, so confirm with your bank.

Yes. A GST-registered business can claim Input Tax Credit on the 18% GST paid on business banking services — account maintenance, NEFT/RTGS, card fees, locker rent, loan processing and forex charges. The bank must issue a tax invoice or GST statement showing your GSTIN and the GST separately, and the credit must appear in your GSTR-2B. ITC is blocked for charges on a personal account or for exempt supplies.

Register your GSTIN with the bank against the business account and request the monthly GST statement or consolidated tax invoice most banks generate. It must show the bank's GSTIN, your GSTIN, the taxable charge and the GST amount. Once the bank files its GSTR-1, the credit reflects in your GSTR-2B and you claim it in GSTR-3B after reconciliation.

The 18% GST rate is the same on charges for both account types. The difference is ITC eligibility: charges on a business current account are eligible for Input Tax Credit, while charges on a personal savings account are not, because the service is not used for business.