Further to my discussion with your customer service official Mr. Faizal today, I wish to dispute the charge of SErvice taxon my credit card 4181xxxx xxxx 6xx2. kindly arrange to reverse the service tax component on my credit card as it is incorrect to charge service tax on interest component. You are only authorized to charge service tax on SERVICE, and LENDING is not a SERVICE.
As per my understanding:
To clarify the position as per Service tax law, the relevant provisions are
listed as follows:
„« As per Section 65(105)(zzzw) of Finance Act, 1994, "credit card or other
payment card services" are "services provided or to be provided to any
person, by any other person, in relation to credit card, debit card, charge
card or other payment card service, in any manner." The value for the
taxable service will be the gross amount charged by the service provider for
such services. The basic element of taxability under this head is that the
transaction should amount to ¡§Service¡¨, which is not satisfied in the case
of Interest charged on delayed payments.
„« There is another head which is relevant to this discussion i.e. "Banking
and Other Financial Services". As per Section 65(105)(zm) introduced in the
Finance Act, 1994, "Banking and Other Financial Services" are "Services
provided or to be provided to a customer by a banking company or a financial
institution, including a non-banking financial company, or any other body
corporate or any other person in relation to banking and other financial
services."
„« In terms of Section 65(12) of the Act, banking and financial services
specifically include lending of money.
„« Any loan given by a bank, even though it is a short term loan under a
credit card is lending by a bank and as such this service will be more
appropriately be covered under the head "Banking and other Financial
Services".
„« Finally, for calculating the taxable value of the services, as per
clause( iv) Rule 6(2) of Service Tax(Determination of Value) Rules 2006,
any "interest" charged on the loans advanced cannot be included.
Under such circumstances, the bank cannot charge any service tax either on
the repayment amounts or the interest charged on the principal amounts.
Regards,