BFSI SectorBanking & Capital Markets

GST on Banking & Financial Services — Loans, Cards, MF, Broking & Digital Payments

Complete GST guide for BFSI: banking charges (18%), interest (exempt), credit/debit card fees (18%), mutual fund AMC charges (18%), stock brokerage (18%), digital payment gateway fees, forex conversion, and the distinction between exempt interest and taxable service fees.

18%

Banking Services

18%

Stock Broking

18%

Fund Management

18%

Loan Processing

18%

ATM Operations

18%

UPI/NEFT/RTGS

18%

Credit Card Fees

Exempt

Interest on Loans

Banking & Financial Services — GST Framework

Banking Services — Uniform 18%

All banking services attract 18% GST: account maintenance fees, cheque book charges, locker rent, demand draft charges, NEFT/RTGS/IMPS fees, SMS alerts, debit card annual fees. Banks must register in each state where they have branches. ITC available on inputs (IT infrastructure, rent, professional services). GST is charged on the fee/commission, NOT on the principal loan amount or deposits.

Interest & Loan — Exempt

Interest earned on loans, advances, deposits is EXEMPT from GST. This is classified under 'services by way of extending deposits, loans or advances in so far as the consideration is represented by way of interest or discount.' Processing fees: 18%. Prepayment/foreclosure charges: 18%. Penal interest: exempt (if interest nature) or 18% (if penal charges). EMI = Principal (exempt) + Interest (exempt) + Processing fee (18%).

Credit Cards & Debit Cards

Annual/joining fees: 18% GST. Late payment charges: 18%. Cash advance fees: 18%. Foreign currency markup: 18%. Reward program redemption: no GST (not a service). MDR (Merchant Discount Rate): 18% — paid by merchant to acquiring bank. Interchange fee between issuing and acquiring bank: 18%. Credit card interest (revolving credit): exempt. Card replacement charges: 18%.

Mutual Funds & Asset Management

Asset Management Company (AMC) fees: 18% GST. Expense ratio includes GST component. Entry load: abolished (SEBI 2009). Exit load: 18% on the load amount. Fund management services: 18%. Registrar & Transfer Agent (RTA): 18%. Custodian services: 18%. Brokerage on MF distribution: 18%. NAV is calculated AFTER deducting GST on AMC fees. Portfolio Management Services (PMS): 18% on management fee.

Stock Broking & Capital Markets

Brokerage/commission: 18% GST. Demat account maintenance: 18%. Transaction charges (NSE/BSE): 18%. Depository participant charges (CDSL/NSDL): 18%. Advisory/research fees: 18%. Algo trading charges: 18%. IPO processing: 18%. Margin trading interest: exempt. Securities Transaction Tax (STT): NOT GST — separate levy. Commodity trading brokerage: 18%. Currency derivatives: 18%.

Digital Payments & Fintech

UPI transactions: 18% on interchange (MDR waived for users since Jan 2020, but GST applies on bank charges where applicable). Payment gateway charges: 18%. Wallet loading: no GST (not a service). Wallet-to-bank transfer: 18% on convenience fee. BNPL (Buy Now Pay Later): interest exempt, processing fee 18%. Lending platform commission: 18%. P2P lending platform fee: 18%.

Banking & Finance — Rate Table

ServiceSACGST RateNotes
Account maintenance/service charges997118%All scheduled bank charges
Interest on loans/deposits9971ExemptPure interest component
Loan processing fee997118%One-time charge
Credit card annual fee997118%Joining + renewal
NEFT/RTGS/IMPS charges997118%Per-transaction fee
Locker rent997118%Annual rental
Stock brokerage997118%Per-trade commission
Mutual fund AMC fee997118%Part of expense ratio
Insurance premium (life)997118%On premium excluding savings
Payment gateway fee997118%Merchant charges
Foreign exchange conversion997118%On markup/commission
Guarantee/LC commission997118%Bank guarantee charges

Frequently Asked Questions

Is GST charged on bank loan interest?
No — interest on loans (home loan, personal loan, car loan, business loan) is EXEMPT from GST. The exemption covers consideration 'represented by way of interest or discount' on deposits, loans, and advances. However, associated charges ARE taxable at 18%: processing fees, prepayment charges, documentation charges, legal fees, valuation fees. So your EMI itself has no GST, but the one-time fees do.
How does GST apply to mutual fund investments?
GST of 18% applies on the Asset Management Company (AMC) fee — which is part of the expense ratio. If a fund has 1.5% expense ratio, the AMC fee portion includes 18% GST. This is deducted from the fund's NAV daily, so investors don't see a separate GST charge. Exit load (if applicable) also attracts 18% GST. Brokerage paid by AMC for buying/selling securities: 18% GST (borne by the fund).
Do UPI transactions attract GST?
For end-users: No direct GST on UPI payments (MDR was waived by government from January 2020 for person-to-merchant UPI payments). However, banks internally bear interchange costs — and GST applies on inter-bank settlement fees. For merchants using payment aggregators: the aggregator's commission attracts 18% GST. So while consumers see zero charges, the ecosystem participants pay GST on their service fees.
What is the GST on forex transactions?
Foreign exchange conversion attracts 18% GST on the service component (markup/commission), calculated on a slab basis: Up to ₹1 lakh: 1% of gross amount or ₹250 (whichever higher). ₹1-10 lakh: ₹1,000 + 0.5% above ₹1 lakh. Above ₹10 lakh: ₹5,500 + 0.1% above ₹10 lakh (max ₹60,000). The 18% GST applies on this calculated value — not on the entire forex amount.

Financial Services GST — Interest vs Fee Automated

Laabam.One automatically classifies banking transactions as exempt (interest) or taxable (fees), handles multi-state bank registration compliance, and computes forex GST on slab basis.

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