LOAN GIVEN TO CREDIT-CARD HOLDERS CANNOT ATTRACT GST : CALCUTTA HC
Is the loan granted on a credit card by Citibank subject to IGST according to the IGST Act, even if the interest on the loan is exempt from IGST?
A recent important verdict from the Calcutta High Court in the matter of Ramesh Kumar Patodia Vs. City Bank N.A. & Ors. has shed light on the matter of whether Integrated Goods and Services Tax (IGST) is applicable to a loan offered by Citibank to a credit card holder. This legal case has prompted inquiries into the connection between the loan and credit card services, along with its eligibility for IGST exemption.
The crux of the case lies in a loan extended to the petitioner, who possessed a credit card issued by Citibank. The petitioner argued that this loan stood independent of credit card services and was, in essence, a separate loan agreement.
The court meticulously scrutinized the definition of credit card services as outlined in the Finance Act and Notification No. 9/2017-Integrated Tax (Rate) to ascertain whether the loan could be classified as a credit card service. Through careful examination of the transaction's nature, the court emphasized that the bank disbursed the loan via a cheque rather than charging it to the credit card. It stressed that the loan transaction maintained no correlation with the credit card services offered by the bank. Consequently, the court concluded that the IGST applied to the loan was unwarranted, asserting that the loan ought to be treated separately from credit card services.
The verdict rendered by the Calcutta High Court offers much-needed clarity regarding the imposition of IGST on loans given by Citibank to credit card holders. By categorizing the loan as distinct from credit card services, the court's ruling prevents borrowers from being saddled with unnecessary taxes. This judicial decision establishes a significant precedent and bolsters the principles of justness and fairness in taxation practices.