The Calcutta High Court has held that IGST not applicable on loan on credit card granted by Citibank.
ISSUE RAISED
Whether loan on credit card granted by Citibank is liable for IGST in terms of the IGST Act even when the interest on loan is exempted from IGST ?
BACKGROUND
The appellant had a credit card provided by Citi Bank. The respondent bank offered a loan being “increased pay lite loan” to him for 12 months with 13% interest per annum payable in 12 equated monthly instalments. The loan amount was disbursed by the bank by an account payee cheque.
The date of advancement of loan. The equated monthly instalment (EMI) amount was Rs.58,050/-. In the last EMI, the interest amount was Rs.621.98/-. The principal amount was adjusted accordingly so that in the last EMI the principal amount was shown as Rs.57,434.02/-, interest Rs.621.98/- resulting in the last EMI of Rs.58,056/-. In respect of the appellant’s credit card, monthly statements were issued where this loan and the EMI payable thereon were indicated. On 16th May, 2019 the bank received a letter dated 13th May, 2019 from the appellant challenging the deduction of the amount on account of IGST.
RULING
The court held that the definition of Credit Card Services as provided in Section 65 (33A) of the Finance Act 1994 no where it will appear that credit card services include loan given to a Credit Card holder. Further upon perusal, of the Notification No. 9/2017. Integrated Tax (Rate) issued by the Department of Revenue, Ministry of Finance, Government of India dated 28th June, 2017 in exercise of its powers conferred by sub-section 1 of Section 6 of the Integrated Goods and Service Tax Act, 2017, it is clear that loan transactions are excluded from Integrated Goods and Service Tax Act 2017, without any exception that loan given to credit card holder is outside the purview. Although credit card Services fall outside the purview of exemptions but there is no mention of loan given to Credit Card holder.
The court said that City Bank granted Loan to the appellant repayable with interest it is to be treated as loan simpliciter and cannot be equated with Credit Card. The basic difference between loan and credit Card is that the former is granted as a necessity and is a welfare scheme and the later is a facility granted to customers to get goods and services on credit from 3rd parties by availing the Credit Card Services of the Bank regarding payment. Thus loan and Credit Card Services cannot be equated. Thus loan to a Credit Card holder is to be treated as a loan and nothing else.
Hence the Appeal was allowed and the order passed by the trial judge is set aside.
Case Title: Ramesh Kumar Patodia Vs. City Bank N.A.
Citation: APO 10 of 2023 With WPO 547 of 2019