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TMI Blog2023 (7) TMI 1102X X X X Extracts X X X X X X X X Extracts X X X X ..... no relationship with the relationship between the appellant and the bank arising out of issue, holding or operation of the credit card. Hence, the appellant s above transaction with the bank was a service which could not be termed as a credit card service and was not exigible to the Integrated Goods and Service Tax under the notification dated 28th June, 2017 - appeal allowed. As per Biswaroop Chowdhury, J. Besides accepting the conclusions arrived by I. P. MUKHERJI J., the followings have been added by Mr. Biswaroop: As respondent City Bank granted Loan to the appellant repayable with interest it is to be treated as loan simpliciter and cannot be equated with Credit Card. The basic difference between loan and credit Card is that the former is granted as a necessity and is a welfare scheme and the later is a facility granted to customers to get goods and services on credit from 3rd parties by availing the Credit Card Services of the Bank regarding payment - Thus loan and Credit Card Services cannot be equated. Thus loan to a Credit Card holder is to be treated as a loan and nothing else. Appeal allowed. - HON BLE MR. JUSTICE I. P. MUKERJI AND HON BLE MR. JUS ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... cise of its powers conferred by sub-section 1 of Section 6 of the Integrated Goods and Services Tax Act, 2017. It exempted certain categories of service from tax. In Sl. No. 28 of the said notification, against heading 9971, except tax levied on interest in credit card services, the services specified in Column-III were exempt from the said tax. Now, the question which arises is whether the tax charged by the bank on each instalment of interest together with the loan amount paid by the appellant was exigible to the said tax? Mr. Patodia, appearing in person very strongly argued that it may be true that possession of the bank s credit card by him entitled him to be offered the loan. But that was all. The advancement of loan by the bank had nothing to do with the credit card or the service which the bank was rendering in relation to it. The bank and he entered into an independent agreement under which the former advanced Rs. 6,50,000/- to him by cheque to be repaid along with 13% interest in 12 equated monthly instalments. Hence, the interest charged on the loan was not interest which is usually charged by the bank on account of loan advanced by use of the credit card. Therefor ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... n and the issuing bank is a member of such club or association. Explanation - For the purpose of this sub clause, an issuing bank and the owner of trade marks or brand names shall be treated as separate persons. He submitted that by credit card services a particular type of service was indicated. The card had to be used at the place of business of the merchant either by swiping it through a machine or by contacting the card with it. The value or consideration for the transaction which is entered in the machine, is charged on the card. This charge is transmitted to the issuer of the card which has an independent contract with the merchant. The transaction is honoured by the bank by making payment of the charged sum to the merchant. The issuer having a separate contract with the holder of the card, then charges that amount to the holder of the card who is obliged to make payment thereof. Usually, a time period is fixed for payment of the charged sum by the holder of the card, failing which, he has to pay interest thereon. Normally, the merchant pays some commission to the issuer of the card for facilitating the transaction between the card holder and the merchant. Ther ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... vice was taxable. Therefore, the exemption notification of 28th June, 2017 did not exempt card service. The loan granted by the bank to the petitioner constituted card service and was exigible to IGST calculated on the interest charged. DISCUSSION Section 65(105)(zzzw) of the Finance Act, 1994 defined taxable service as one by one person to any other person in relation to inter alia credit card or card service. The Integrated Goods and Services Tax Act, 2017 received the assent of the President on 12th April, 2017 and was published in the gazette of India on the same day. The preamble to the Act makes a provision for the levy and collection of tax on inter state supply of goods or service or both by the Central government and for matters connected thereto and incidental therewith. Section 2(12) defines integrated tax as the integrated goods and services tax levied under the Act. Section 5 is the charging section which provides for levy of this tax on an interstate supply of goods or service or both on the value of goods or service under Section 15 of the Central Goods and Services Tax Act, 2017. In Section 15(d) value would include interest or late fee or pe ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... card and that the service should have some relationship or nexus with the holding, operation or use of such card including transactions made with it. Otherwise, a bank may be an issuer of a card to a card holder. The same card holder may be an ordinary savings account holder with the bank. The service rendered by the bank in relation to such ordinary account holding does not have any relationship with the service rendered by the bank to the same customer as a card holder in transactions concerning the card. If the loan was advanced to the appellant through use of the card, then one could have understood that the service was related to the card. In this case, the bank declared the appellant card holder to be eligible to receive loan. His loan amount was advanced by a cheque or draft issued by the bank. That is to say, the loan amount was not generated by charging the appellant s card. It appears in the monthly statement issued in relation to use of the card, that the loan amount was shown and the equated monthly instalment payable indicated. In my opinion, it was only a statement of account. The loan transaction had to be taken as an altogether separate transaction. It had no rel ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... y sub-section 1 of Section 6 of the Integrated Goods and Service Tax Act, 2017, it is clear that loan transactions are excluded from Integrated Goods and Service Tax Act 2017, without any exception that loan given to credit card holder is outside the purview. Although credit card Services fall outside the purview of exemptions but there is no mention of loan given to Credit Card holder. Lending of money by banks to people existed from the date of formation of banks in ancient India. Thus granting of Loan by Banking Institutions is a welfare Scheme formulated by banks as per guidelines of Central Government and Reserve Bank of India. Banking Institutions lent money against personal as well as other securities such as ornaments goods and immovable property. Loans are granted for different purposes, namely house building Education, Medical treatment Agriculture e.t.c. similarly personal loans are also given. Hence to fulfil certain objectives in society and pave the way for development in different fields loans are advanced. At times policy decisions are taken to waive loans or to give relaxation in payments when there is exigency and borrowers suffer hardship. Thus loan is a matte ..... X X X X Extracts X X X X X X X X Extracts X X X X
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