Bank service charges — account maintenance, NEFT/RTGS/IMPS, debit-card fees, locker rent, loan processing and foreclosure fees — attract 18% GST. But interest on loans, EMIs and deposits is fully exempt — interest is not a "service" under GST. Under GST 2.0, individual life and health insurance premiums are now 0% (exempt) from 22 September 2025.
Banking & Financial Services — GST Rate Table
The GST rate for every common banking, lending and investment charge, with whether a business can claim ITC.
| Banking / Financial Service | GST Rate | ITC for Business | Notes |
|---|---|---|---|
| Account maintenance / annual charges | 18% | Yes | Current / business account fees |
| NEFT / RTGS / IMPS transfer fees | 18% | Yes | Per-transaction charges |
| Debit / credit card annual fee | 18% | Yes | Issuance & renewal fees |
| Locker rental fee | 18% | Yes | If used for business |
| Loan processing / documentation fee | 18% | Yes | One-time fee on disbursal |
| Prepayment / foreclosure penalty | 18% | Yes | On business loans |
| ATM withdrawals beyond free limit | 18% | No | ~₹21 fee + 18% GST |
| EMI bounce / dishonour charges | 18% | No | Penal charge, generally personal |
| SWIFT / international wire fees | 18% | Yes | Sending & receiving |
| Forex conversion margin | 18% | Yes | On the spread / slab fee, not full amount |
| Mutual fund management fee (AMC) | 18% | No | Within TER; deducted from NAV |
| Interest on loans / EMIs | Exempt | — | Not a service — fully exempt |
| Interest on deposits (FD / SB / RD) | Exempt | — | Depositor interest is exempt |
| Individual life & health insurance premium | 0% | — | Exempt since 22 Sep 2025 (GST 2.0) |
Rates reflect the GST 2.0 structure effective 22 September 2025. Group insurance and non-individual policies remain at 18%. Confirm on the official GST portal before invoicing.
Interest is Exempt — Only Fees are Taxed
The single rule that decides GST on almost any banking cost: is it interest, or is it a fee? Interest on money lent or deposited is a financial transaction, not a service, so it is exempt. Everything the bank charges as a fee for a service carries 18%.
Interest — no GST
- EMI interest on home, car, personal & business loans
- FD, savings & recurring-deposit interest
- Overdraft & cash-credit interest
- Interest on late payment / delayed EMI
- No invoice-level GST at all
Service fees — with GST
- Loan processing & documentation charges
- Account, card, locker & SMS fees
- NEFT / RTGS / SWIFT & forex charges
- Prepayment, foreclosure & bounce penalties
- ITC available for business banking
On any loan, only the processing fee, prepayment penalty and bounce charge carry 18% GST — the interest in your EMI never does. Banks sometimes label penal or overdue amounts as "charges"; if it is genuinely interest for delay, it stays exempt.
Not sure if a bank charge on your statement carries GST?
Ask a GST Expert →GST on Insurance Premiums — Now 0%
From 22 September 2025, the GST Council exempted all individual life and individual health insurance premiums (and their reinsurance) — the rate dropped from 18% to 0%. This covers term, endowment, ULIP and individual health/mediclaim policies bought by individuals.
| Policy type | GST Rate | Notes |
|---|---|---|
| Individual term life insurance | 0% | Exempt from 22 Sep 2025 |
| Individual health / mediclaim | 0% | Exempt from 22 Sep 2025 |
| Endowment / ULIP (individual) | 0% | Exempt from 22 Sep 2025 |
| Group / employer insurance | 18% | Non-individual policies unchanged |
| General insurance (motor, fire, marine) | 18% | Standard service rate |
For instalment premiums, the exemption applies to premium collected on or after 22 September 2025.
How GST Adds Up on Bank Charges
18% Loan processing fee
Exempt Loan interest (EMI)
A business that took this loan can claim the ₹1,800 GST on the processing fee as ITC; the interest carries no GST either way.
Reconciling bank-charge GST with your returns?
Get GST Filing Help →Claiming ITC on Bank Charges
A GST-registered business can claim Input Tax Credit on the 18% GST charged on its business banking services, provided the credit is not blocked and appears in GSTR-2B.
- Bank issues a tax invoice or GST statement with your GSTIN
- Charges relate to the business account, not a personal one
- GST appears in your GSTR-2B (from the bank's GSTR-1)
- Claimed in GSTR-3B after reconciliation
- Not used for exempt supplies or personal purposes
- Interest & exempt insurance carry no ITC (no GST charged)
ITC is available on
- Account, card & locker fees for the business
- NEFT/RTGS/SWIFT & forex charges
- Loan processing & foreclosure fees on business loans
- Overdraft & cash-credit service charges
ITC is blocked / not available on
- ATM and charges on a personal account
- EMI bounce charges for personal loans
- Mutual fund AMC (investment, not a business input)
- Any interest or exempt insurance — no GST to claim
Bank-charge ITC is small per line but adds up across a year of transactions. Register the bank against your GSTIN so charges flow into GSTR-2B, and reconcile monthly — many businesses simply miss this credit because it is buried in the statement.
Frequently Asked Questions
Related TaxClue services
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