GST on most bank account services in India is charged at 18% on fees such as ATM charges, cheque book fees, and account maintenance charges. Check taxable bank charges, SAC codes, exempt services, and GST calculations in one place.
In summary
- GST on bank account services in India generally applies at 18% on banking fees and service charges levied by banks and financial institutions.
- Charges such as debit card annual fees, SMS alerts, ATM transactions beyond free limits, cheque bounce charges, and account maintenance fees attract GST under banking and financial services rules.
- Banking services are classified under SAC Code 9971, which covers financial and related services under the Goods and Services Tax framework.
- Certain banking services such as interest earned on savings accounts, deposits, and loans remain exempt from GST as per Goods and Services Tax Council guidelines.
Businesses paying GST on eligible banking charges can claim Input Tax Credit subject to compliance with invoicing and business-use conditions.
What is GST on bank account services in India?
GST on bank account services in India is the tax charged on banking-related services provided by banks, cooperative banks, and financial institutions. Under the Goods and Services Tax framework, most banking services attract 18% GST when banks levy a fee, commission, or service charge.
Services such as account maintenance, ATM withdrawals beyond the free transaction limit, debit card issuance, cheque processing, demand drafts, SMS alerts, and fund transfer charges attract GST. However, interest earned on savings accounts, fixed deposits, and recurring deposits remains exempt from GST because interest income is treated differently under GST law.
To understand broader indirect taxation rules, read more about GST and its applicability across financial services.
GST on bank charges: Which fees are taxable under GST?
The following bank charges generally attract GST at 18% in India:
- Savings account maintenance charges
- Current account service charges
- ATM transaction fees beyond free limits
- Debit card annual maintenance charges
- Credit card late payment fees
- Cheque book issuance charges
- Demand draft and pay order charges
- IMPS, RTGS, and NEFT processing fees where applicable
- SMS alert charges
- Loan processing fees
- Foreclosure and cheque bounce charges
- Locker rental charges
- ECS return charges
- Cash handling charges for business accounts
As per Goods and Services Tax regulations, GST is charged only on the service fee component and not on the principal amount or deposit value. For example, if a bank charges Rs. 100 as an ATM service fee, GST of 18% adds Rs. 18, making the total charge Rs. 118.
GST rate on banking services: SAC code and current slab
Banking and financial services in India fall under SAC Code 9971 and generally attract 18% GST. The Service Accounting Code system helps classify services for GST compliance and invoicing purposes.
To understand how service classification works, refer to the HSN Code explained guide.
| Banking service category | SAC code | GST rate |
|---|---|---|
| Financial and banking services | 9971 | 18% |
| Loan processing services | 997113 | 18% |
| Credit card services | 997119 | 18% |
| Account maintenance services | 997113 | 18% |
| ATM and cash handling services | 997113 | 18% |
| Locker and custodial services | 997154 | 18% |
GST becomes applicable only when the bank levies a service fee or commission. Interest income on deposits and lending activities remains outside the GST net in most cases.
For updated indirect tax slabs across sectors, check the GST rate page.
List of bank charges that attract GST in India: complete table
| Bank charge type | Typical charge range | GST applicable | GST rate |
|---|---|---|---|
| Savings account maintenance fee | Rs. 100–Rs. 600 per year | Yes | 18% |
| Debit card annual fee | Rs. 150–Rs. 750 per year | Yes | 18% |
| ATM transaction fee beyond limit | Rs. 20–Rs. 25 per transaction | Yes | 18% |
| SMS alert charges | Rs. 15–Rs. 30 per quarter | Yes | 18% |
| Cheque bounce charges | Rs. 250–Rs. 750 per instance | Yes | 18% |
| Demand draft issuance | Based on transaction value | Yes | 18% |
| RTGS and NEFT charges | Varies by amount | Yes | 18% |
| Cash handling charges | Based on deposit volume | Yes | 18% |
| Loan processing fees | 0.50%–3.00% of loan amount | Yes | 18% |
| Credit card late payment fee | Varies by outstanding amount | Yes | 18% |
| Locker rent | Rs. 1,000–Rs. 10,000 per year | Yes | 18% |
| ECS return charges | Rs. 250–Rs. 750 per return | Yes | 18% |
Banks usually show GST separately on statements and invoices for transparency and compliance purposes.
Bank services exempt from GST: What is not taxed?
Certain banking services remain exempt from GST because they do not involve taxable service consideration under GST law.
The following services are commonly exempt:
- Interest earned on savings accounts
- Interest earned on fixed deposits
- Interest earned on recurring deposits
- Interest charged on loans and advances
- Basic savings bank deposit account services under specified conditions
- Inter-bank sale and purchase of foreign exchange under exempt categories
- Pension disbursement services in specified cases
The Central Board of Indirect Taxes and Customs states that GST applies primarily to fees and commissions, not pure interest income. For example, if a savings account earns Rs. 5,000 as annual interest, no GST applies on that amount.
How GST on bank charges appears on your bank statement
Banks generally display GST separately against taxable service charges in account statements and transaction summaries. This helps account holders identify the exact tax amount charged on each banking service.
A bank statement may show entries in the following format:
- ATM usage fee: Rs. 20
- GST on ATM fee @18%: Rs. 3.60
- Debit card annual fee: Rs. 250
- GST on debit card fee @18%: Rs. 45
- SMS alert fee: Rs. 15
- GST on SMS fee @18%: Rs. 2.70
Banks issue consolidated account statements monthly or quarterly depending on the account type. Businesses can use GST breakup details from these statements while maintaining accounting records and tax documentation.
GST on bank account vs GST on NBFC charges: Key differences
| Parameter | Bank charges | NBFC charges |
|---|---|---|
| Governing regulator | Reserve Bank of India | Reserve Bank of India |
| GST applicability | Mostly on service fees | Mostly on service fees |
| GST rate | 18% | 18% |
| Interest on loans | Generally exempt | Generally exempt |
| Processing fees | Taxable | Taxable |
| Documentation charges | Taxable | Taxable |
| Loan foreclosure charges | Taxable | Taxable |
| Account maintenance charges | Common in banks | Limited in NBFCs |
| Service classification | SAC Code 9971 | SAC Code 9971 |
| ITC eligibility for businesses | Available subject to conditions | Available subject to conditions |
Banks primarily charge GST on transactional banking services, while NBFCs commonly levy GST on financing-related service charges such as loan processing and documentation fees.
How to claim ITC on GST paid on bank charges: step-by-step
Businesses can claim eligible GST paid on banking charges as Input Tax Credit if the services are used for business purposes and proper tax documentation is available.
To understand the mechanism in detail, read about input tax credit under GST.
Step 1: Collect bank invoices and statements
Download monthly bank statements and GST invoices showing taxable charges and GST amounts separately.
Step 2: Verify GSTIN details
Ensure the bank has correctly mentioned the business GST Identification Number on invoices wherever applicable.
Step 3: Match GST details in GSTR-2B
Cross-check whether the GST charged by the bank appears in the auto-generated GSTR-2B statement on the GST portal.
Step 4: Record expenses in accounting books
Classify banking charges under eligible business expenses while recording Input Tax Credit separately.
Step 5: Claim ITC in GSTR-3B
Report the eligible GST amount under Input Tax Credit while filing the GSTR-3B return.
Example
A manufacturing company in Pune pays Rs. 5,000 as quarterly banking and transaction charges. GST at 18% amounts to Rs. 900. If the services are used for business operations and compliance conditions are satisfied, the company can claim Rs. 900 as Input Tax Credit.
Pros and cons of GST on bank charges for account holders
GST on bank charges increases transparency in taxation but also raises the effective cost of banking services for consumers and businesses.
Pros
- Standardised taxation structure across banking services
- Clear disclosure of service tax components on statements
- Easier Input Tax Credit claims for businesses
- Uniform GST rate of 18% improves tax consistency
- Simplified invoicing and accounting for banks
Cons
- Higher effective cost of routine banking services
- Additional charges on ATM and transaction services
- Increased cost of maintaining multiple accounts
- GST applies even on small-value service fees
- Businesses must maintain documentation for ITC claims
For example, a business current account with annual service fees of Rs. 10,000 attracts an additional GST cost of Rs. 1,800. However, registered businesses can offset this amount through eligible Input Tax Credit claims.
Conclusion
GST on bank account services in India mainly applies to banking fees, commissions, and transactional charges at 18%, while interest income on deposits and loans generally remains exempt. Understanding SAC codes, taxable services, exempt categories, and Input Tax Credit eligibility helps individuals and businesses manage banking costs more efficiently.
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