Paying In Plastic: Watch Those Bills Mount

Credit card issuing banks are up in arms against the government move of levying five per cent service tax on credit card charges. The levy comes into effect from today.

The five per cent service tax is levied on the joining fees, annual fees, add on fees, charges levied on lost card replacements as well as duplicate statements and interest charges and late payment fees.

The credit card committee of the Indian Banks Association (IBA) is moving the finance ministry on this issue.

The banks are also examining legal options to stall the move. The government move will deal a body blow to the spread of plastic money use in the country.

 

The banks are likely to pass on the burden of service tax to the customers, thereby increasing transaction costs.

In an earlier meeting with revenue officials, card companies had agreed on a service tax on the joining fees, annual fees and add-on fees as these were the services that could be demarcated as services to the customer, says a senior bank official. The major grouse of the banks is that the finance charges are levied by banks towards utilisation of a line of credit.