You may have received a message recently on social media that stated that you will have to pay GST twice if you pay your utility bills with your\u00a0Credit Card. There was another rumor doing the rounds that said, \u201cIf you use your Credit Cards<\/a> post-GST, then you\u2019ll have to pay tax on the whole billed amount.\u201d<\/p>\n Don\u2019t worry! These are just rumors and you must not pay heed to such messages. After the rumors went viral, the Government issued a clarification and asked people to refrain from circulating these messages. Revenue Secretary Hasmukh Adhia tweeted, \u201cA 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.\u201d<\/p>\n It has been clarified by the government and financial experts repeatedly on several platforms that GST would be imposed only once and it would be charged in a similar way as it used to be done in the previous tax system. Only the tax rate has been increased to 18%. It was 15% under the service tax system.<\/p>\n A lot of people have confusion about how GST will be applicable on Credit Card bills. In terms of applicability, there is no difference between GST and its predecessor \u2018Service Tax\u2019 (ST).<\/p>\n As service tax was not calculated on the retail transactions, similarly there won\u2019t be any GST imposed now. Service tax was charged at 15% on card fees, EMIs interest, late fees, processing charges, etc. Similarly, now GST would be applicable on all these items instead of service tax.<\/p>\n Let\u2019s say, if you have purchased something on a 6 month EMI using your Credit Card. The total interest you pay in 6 months is Rs. 532, whereas the EMI processing fee is Rs. 150. Based on these assumptions, let\u2019s check out the difference between service tax and GST implication on this transaction:<\/p>\nHow much you pay on Credit Card under GST?<\/h2>\n
Service Tax Vs GST implication on Credit Card EMI<\/u><\/strong><\/td>\n<\/tr>\n| Detail<\/strong><\/td>\n | ST @15%<\/strong><\/td>\n | GST @ 18%<\/strong><\/td>\n<\/tr>\n | Loan Amount<\/td>\n | Rs 10,000<\/td>\n | <\/td>\n | <\/td>\n<\/tr>\n | Interest Rate (Pa)<\/td>\n | 18%<\/td>\n | <\/td>\n | <\/td>\n<\/tr>\n | EMI Tenure<\/td>\n | 6 months<\/td>\n | <\/td>\n | <\/td>\n<\/tr>\n | Interest paid in 6 months<\/td>\n | 532<\/td>\n | 79.8<\/td>\n | 95.76<\/td>\n<\/tr>\n | Processing charges<\/td>\n | 150<\/td>\n | 22.5<\/td>\n | 27<\/td>\n<\/tr>\n | Total tax<\/td>\n | <\/td>\n | 102.3<\/td>\n | 122.76<\/td>\n<\/tr>\n | * All figures are assumed<\/em><\/td>\n | <\/td>\n | <\/td>\n | <\/td>\n<\/tr>\n<\/tbody>\n<\/table>\n | As it is clear from the table, you need to pay Rs. 20.46 extra under the GST format as compared with ST. The increase in tax payment is not very large.<\/p>\n The only difference with GST is that the tax rate will increase from 15% to 18%. Since the charges are not calculated on the amount you utilise using your Credit Card, but on the interest rate applicable, the implication of extra tax under GST would be minimal.<\/p>\n Finally, if you are getting confused by social media messages, then talk to your Credit Card company to get more information to understand the difference between GST and service tax. While you read more about GST, stay away from rumours that may lead you to commit a financial mistake.<\/p>\n","protected":false},"excerpt":{"rendered":" |