Service tax on interest charged

[sanjay gupta]

My credit card issuer charging service tax on interest charged on loan taken, which shall be repaid in 6 EMI.

My question is that whether service tax is applicable on interest charged by credit card issuer or not?

Thanks in advance.

Sanjay Gupta

AI Summary

Debate on Service Tax: Is Interest on Credit Card EMI Loans Taxable Under Finance Act, 1994? A user inquired whether service tax applies to interest charged by a credit card issuer on a loan repaid in EMIs. One respondent stated that interest alone is not liable for service tax as it is akin to a loan, but penalties for late payments are taxable. Another argued that interest is taxable as it is income for providing financial services. The credit card issuer clarified that EMI services reduce the credit limit and are subject to service tax under the Finance Act, 1994. A final response supported the view that only interest, not service fees, is exempt from service tax.