Credit card loan EMI interest component subject to IGST levy, exemption notification inapplicable to such services

Calcutta HC dismissed a writ petition challenging IGST levy on interest component of credit card loan EMI. The court held the petition maintainable against the private bank as it sought statutory compliance from both bank and tax authorities. Territorial jurisdiction was established as part of cause of action arose within HC's jurisdiction despite bank's office being located elsewhere. The court ruled that the loan service constituted credit card services, making the interest component taxable under IGST provisions. The exemption notification dated June 28, 2017 did not apply to interest on credit card services, resulting in petition dismissal.

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Issues Involved:
1. Maintainability of the writ petition and territorial jurisdiction of the court.
2. Exemption of the interest component of EMI from IGST under the notification dated June 28, 2017.

Issue-wise Detailed Analysis:

I. Maintainability of the writ petition and territorial jurisdiction of the court:

Maintainability:
The respondents argued that the writ petition against the bank, which is not a nationalized bank, is not maintainable under Article 226 of the Constitution of India. According to Article 226(1), the High Court has the power to issue directions, orders, or writs to any person or authority within its jurisdiction. The Supreme Court in the case of Federal Bank Ltd. vs. Sagar Thomas and others (2003) held that a writ petition may be maintainable against a private body discharging public duty or positive obligation of public nature, and also against a person or body under liability to discharge any function under any statute to compel it to perform such a statutory function.

The court noted that the respondent bank is a private entity with no government shareholding, financial assistance, or involvement in its affairs. However, since the bank is a registered person under the CGST Act and is collecting IGST, it must act according to the provisions of the IGST Act. The petitioner's claim is that the bank is charging IGST in violation of the exemption notification dated June 28, 2017. Therefore, the court held that the writ petition is maintainable as it seeks to compel the bank to comply with statutory obligations.

Territorial Jurisdiction:
The respondents also contended that the court lacks territorial jurisdiction as the registered office of the bank is outside West Bengal. However, the court noted that the credit card statements issued by the bank mentioned that the place of supply is West Bengal, and the demand draft was dispatched to the petitioner's address within the court's jurisdiction. Citing the Supreme Court's decision in Om Prakash Srivastava vs. Union of India (2006), which held that a High Court can exercise jurisdiction if the cause of action arises in part within its territory, the court concluded that it has jurisdiction to entertain the writ petition.

II. Exemption of the interest component of EMI from IGST under the notification dated June 28, 2017:

The petitioner argued that the interest component of the EMI for the loan granted by the bank is exempted from IGST as per Serial No. 28 of Notification No. 9/2017-Integrated Tax (Rate) dated June 28, 2017. The petitioner contended that the loan should not be considered a credit card service merely because the EMI is indicated in the credit card statement.

The court examined the terms and conditions of the loan offer, which was restricted to Citi Bank Credit Card holders and processed as part of the credit card services. The EMI was included in the monthly credit card statement, and the applicable interest rate was mentioned therein. The court concluded that the service rendered by the bank in extending the loan is a credit card service.

The notification dated June 28, 2017, exempts interstate supply of services by way of extending loans insofar as the consideration is represented by way of interest, but it specifically excludes "interest involved in credit card services." Since the court determined that the loan in question is a credit card service, the interest component of the EMI is not exempted from IGST under the said notification.

Conclusion:
The court dismissed the writ petition, holding that the interest component of the EMI for the loan advanced by the bank is not exempted from IGST under the notification dated June 28, 2017. The petitioner's reliance on the Supreme Court's decision in Himalayan Co-operative Milk Product Union Ltd. was found to be inapplicable, as the notification clearly excludes interest involved in credit card services from the exemption.

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