What is the impact of GST on personal loans?

2 min read

The Government of India implemented GST (Goods and Service Tax) on 1 July 2017. This regulation has affected all goods and services sold or offered in India. Personal loans are also part of this list. As they are extremely popular and you may consider applying for one for planned or urgent requirements, know-how GST impacts your borrowing experience.

How can I avoid paying GST on a personal loan?

It is essential to understand that GST on loan is not applicable, as they involve lending between individuals. GST is levied on goods and services, not on financial transactions like loans. Ensure you're dealing with genuine lenders, follow legal procedures, and consult a financial advisor for more guidance.

Components of personal loan before and after implementing GST


Before implementation
of GST

After implementation
of GST

Features, interest rates and EMIs

Dependent on the lender you opt for

No change

Processing fees

Service tax of 15% on processing fees

GST of 15% on processing fees

Eligibility criteria

Dependent on the lender you opt for

No change

Documentation required

No GST certificate

GST certificate required (for self-employed borrowers availing a business loan, a type of personal loan)

Pros and cons of GST on personal loans


  • Bajaj Finserv levies nominal processing fees. Therefore, even with GST, your outgo remains minimal
  • Post GST, borrowers only have to pay one tax instead of multiple taxes
  • You only have to pay GST once


  • GST has increased the subsequent tax payable by 3%, thereby increasing the cost of borrowing marginally

Personal loan components affected by GST

The following personal loan interest attracts tax when you borrow from Bajaj Finance Limited.

  • Bounce charges
  • Processing fees
  • Foreclosure charges
  • Penal interest
  • Loan account statement charges
  • Charges on outstation collection
  • Part-prepayment charges

If you’re keen on making a part-prepayment, for instance, use the Bajaj Finserv Part Pre-Payment Calculator beforehand, as it includes the applicable GST.

To plan repayment, on the whole, use the Bajaj Finserv Personal Loan EMI Calculator before applying for a loan, and ensure that your repayment journey is smooth and hassle-free.

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Frequently asked questions

Is there a GST on a personal loan?

Personal loans are exempt from GST as they are not considered a supply of goods or services under GST law.

Is GST applicable on loan EMI?

GST is not applicable on loan EMIs as they are considered repayments of principal amount and interest, not subject to GST.

Is interest on loan GST-free?

Interest on loans, including personal loans, is exempt from GST.

Which loan is tax-free?

Loans such as education loans and home loans may qualify for tax benefits under specific sections of the Income Tax Act, making them tax-free.