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Myths about Impact of GST on Credit Cards

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The introduction of Goods & Services Tax (GST) from July 1, 2017 has been the biggest tax reform in India since independence. Under a unified tax regime, several state & central taxes have been subsumed by GST.

However, the new taxation system has still not been properly understood by people. Specifically, there have been quite a few rumors doing social media rounds with regard to the impact of GST on credit cards. We have hereby highlighted and busted a series of myths related to GST and credit cards.

Myth #1: For utility bill payment through credit cards, GST will be levied twice!

This is an inaccurate statement. Whether you pay through cash or cards, GST will be levied only once. The government and the revenue secretary Hasmukh Adhia has denied this fact and stated that there won’t be a case of double taxation irrespective of the mode of payment.

Myth #2: GST will increase my credit card bills!

GST is levied at 18 percent, whereas Service Tax was earlier levied at 15 percent. This is an increase of 3 percent. Credit card users would know that before GST, there was no Service Tax levied on the payment of utility bills. This fact hasn’t changed even in the GST regime. End users do not have to pay any taxes on the payment utility bills. In fact the utility bill providers used to pay Service Tax to the card issuers and even this is still the same in GST. That means an additional rate of 3 percent would have a negligible impact on the utility service providers but none on the end users of the credit card.

Myth #3: GST will have a massive impact on credit card users

The fact is that GST will have no additional impact on careful credit card users. It will have an additional impact only on defaulters who do not make repayments on time. For late repayments, you are charged a penalty which used to attract 15% Service Tax earlier and will now attract 18% GST. The penalty will thus increase by a small margin. However, this should impact you only if you have a habit of late repayments.

If you are a smart user, there is no way that your credit card usage will be affected with the introduction of GST. Using credit cards would rather help in improving your credit score. So don’t be afraid or fall prey to rumors and if you do not have one already, make your credit card application now!


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