IGST in Credit Card Transactions and Its Effects On Your EMI and Charges

Before the Goods and Services Tax (GST) was introduced in India, credit card bills imposed a flat 15% service tax. However, after its introduction, credit card EMIs now attract an 18% GST. 

You may have also noticed a component called IGST in credit card invoices. It is the tax levied when you order supplies from another state. For more details about why IGST is charged, keep reading.

Quick Overview 

• GST on credit cards is 18%, applied to interest, processing fees and charges.
• IGST applies to interstate transactions, while intrastate transactions split into SGST and CGST.
• Businesses can reduce liabilities by claiming GST input tax credit (ITC) with proper compliance documentation.

What is the Charge of IGST on Credit Card? 

When you borrow with your credit card, the card issuer imposes GST on the interest portion rather than on the borrowed amount. This means you have to pay 18% extra on the interest fee to your card provider.

If you order a product or service from a vendor within your state (intrastate transaction), then the tax amount is split into two different types of GST, SGST and CGST. Otherwise, you must pay 18% IGST for interstate supplies.

Note that card issuers will charge GST on several elements besides interest. These include the annual fee, late payment charges, loan processing costs and so on. You should be aware of these details to calculate outstanding EMIs accurately and make well-informed financial decisions.

Impact of IGST on Credit Card Bill

Just knowing ‘what is IGST in credit card’ is not enough to fully understand the tax implications on card EMIs. Here’s how it impacts the cardholders: 

• IGST levy means card users are now liable to pay greater interest rates. 
• After GST implementation, banks have to charge more processing fees on pending credit card installments. 
• Companies now charge taxes on cashback and credited rewards as well. 

Availability of ITC Claims 

Until April 30th, 2025, the GOI’s Press Information Bureau suggests that over 1.51 crore Indian businesses have active GST registrations. These entities have the opportunity to reduce their overall tax liabilities by claiming the GST already paid on supplies purchased for business purposes.

However, to make valid ITC claims under the CGST Act, companies and individuals must meet the following conditions:

• They have to produce the latest documents, such as debit notes, tax invoices, etc. 
• Receipts of goods or services must be provided. 
• Supporting documents showing the payment of relevant GST have to be submitted. 

Finally, the business or individual should file ITC returns under Section 39 of the CGST Act. 

Common Myths About GST on Credit Cards

Credit card users mainly encounter these 3 common misconceptions about GST on credit cards:

Myth 1: Every Single Credit Card Transaction Attracts GST

Not all purchases are subject to a GST levy. Only specific aspects, such as the annual card fee and interest on a loan, impose GST.

Myth 2: Goods Purchased via a Credit Card Are More Expensive

Any kind of GST (CGST, SGST or IGST) is applied to credit card statements for the services offered by the card issuer. Therefore, the product costs remain unchanged even for credit card users.

Myth 3: Credit Card Statements Have Hidden GST Costs

Your credit card statement breaks down each of your liabilities. So, you will see GST being added only to borrowing interest and the annual fee.

What is the Difference Between Credit Card GST and Service Tax? 

Final Word

The concept of IGST in credit card billing may seem complex, but it essentially applies to interstate supplies. By knowing how GST impacts EMIs, late fees and annual charges, customers can better manage credit card expenses, minimise surprises and make better financial decisions while businesses utilise input tax credit advantages.