You might have received a WhatsApp forwarded message that says ‘using your Credit Card to pay utility bills will result in double taxation under the Goods and Services Tax (GST) regime.’ Don’t panic! This is just the rumour mill going crazy. The Indian Government has come out with a clarification that this is not the case.
Indian Revenue Secretary at the Ministry of Finance, Hasmukh Adhia, has tweeted, “A wrong message is doing rounds on social media that if you make payment of utility bills by Credit Cards, you will be paying GST twice. This is completely untrue. Please do not recirculate such message without checking it with authority.”
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The National Payments Corporation of India’s Managing Director, A P Hota, has told newspapers that there will be no charge for Credit Card payments apart from the GST of 18% which has replaced service tax which was charged at 15%. If you didn’t know, GST of 18% will not be on the Credit Card transactions. This rate will be levied on the fees charged for Credit Card transactions and applies to only merchants who offer to swipe your Credit Card for your purchases. Now, what does this mean?
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Merchants pay ‘Merchant Discount Rate’ (MDR) to banks for the Credit Card transactions accepted by them. Suppose the merchant was paying a MDR of Rs. 100 for every transaction, they would have paid Rs. 15 as service tax earlier. Now, under GST, they will be paying Rs. 18. The merchant’s customers (that is, you!) will not be asked to pay that MDR or the tax on it for the purchases from the merchant. So, as a card holder, you don’t have to pay any GST on any of your Credit Card transactions. Yay! However, there might be GST on your Credit Card bills if you have to make a late payment fee. Arrgh! So, pay those bills on time every time.
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Also, you must be aware that all banking services will be charged GST at 18%, up from 15% that was charged as service tax. This will include service charges for your locker fees, Debit Card, ATM withdrawal, Home Loan processing fees and cash handling services. Just like service tax was only on services rendered by banks, GST will also apply only on charges for banking services.
So, go ahead and use your Credit Card to make those bill payments and purchases. Haven’t got one yet? Get a Shopping and Cashback Credit Card to save big.