Borrower (Petitioner) was a valid holder of a Credit Card. He received an E-mail on 21.02.2019 and 28.02.2019 from the Bank offering an Instant Loan of Rs.6,50,000/- at 13% interest above the credit limit. The petitioner expressed his willingness on 28.02.2019 to the offer via SMS. On 02.03.2019 an Email was received by the petitioner that his loan amount was disbursed and is repayable in EMIs along with an additional initial interest amount. A demand draft of Rs. 6,50,000/- was dispatched to the home address of the petitioner which was successfully encashed by him. On receiving the receipt of the credit card statements for two successive periods, the petitioner found that he was being charged IGST @ 18% on initial interest as well as the interest component of EMI. The petitioner requested the bank reverse the IGST charges and protested against the charging of IGST in several letters.
Grant of loan by the Bank to the petitioner comes within the meaning of “supply” as per Section 7 of the CGST Act, 2017 and the interest component of the loan which is included in the EMI is the value of such supply of service of granting the loan. Such consideration for the supply of service by way of granting a loan cannot be said to be a credit card service merely because the EMI is indicated in the credit card statement. The interstate supply of services by way of extending loans for the consideration of payment is exempted from levy of Integrated Tax as per Serial No. 28 of the Notification No. 9/2017. The contention of the petitioner is that the authorities have acted dehors of the said notification.
The respondents have raised the question of maintainability of this writ petition on twofold grounds-
- The reliefs claimed against the Respondent Bank are not maintainable under Article 226 of the Constitution as the Bank is not a nationalized bank.
- The registered office of the Respondent Bank is situated outside the State of West Bengal and the Calcutta HC lacks jurisdiction.
On the applicability of the exemption notification dated 28th June 2017, the respondents submitted to the Hon’ble Court that the loan was extended to the Borrower/Petitioner on the basis of a Credit Card issued by the Bank and the interest component of the EMI is on account of Credit Card services which is not exempted as per the notification.
REASONS AND FINDINGS OF THE COURT
On maintainability of the Writ Petition, the Court emphasised Article 226(1) of the Constitution. The Hon’ble Court also relied on the judgement of Federal Bank Ltd. vs. Sagar Thomas and others paragraphs no. 18 & 33. The Court also relied upon the judgement of Om Prakash Srivastav in which the Hon’ble Supreme Court held that the High Courts can issue Writs if the cause of action arises in part within their jurisdiction.
Later while looking at the terms and conditions of the offer of loan dated 21st February 2019 and 28th February 2019 the Court found that the offer was valid only for customers holding a Citi Bank Credit Card issued in India. It was also mentioned that the final loan amount will be subject to eligibility as per Citi Credit processing criteria. The loan amount was above the credit limit of the Citi Credit Card. It was further mentioned that the EMI amount due appears in the card number’s monthly credit card statement. If the amount paid towards dues on the credit card is less than the total amount due to finance charges shall be levied on such outstanding(including but not limited to the transaction fee and EMI as above) as per the applicable interest rates. The Court noted that the offer was not for all intending borrowers but was restricted to persons holding the Citi Bank Credit Card. The criteria for processing of the loan, the manner in which the EMI of the loan is reflected in the Credit Card statements, and the charging of interest in case there is a shortfall in the payment of the amount due as well as the mode of payment all goes to prove that the service rendered by the Bank in extending the loan in question is nothing but a service pertaining to the said Credit card. The terms and conditions mentioned in the loan offer were accepted by the petitioner. By considering the facts the Court is of the View that the services by way of extending loans by the bank amount to Credit Card Services.
As per the case of the petitioner, the interest component of EMI of the loan advanced by the bank is exempted under the said notification. The expression “other than interest involved in credit card services” appearing under Serial No. 28 of the said notification carves out an exception by excluding the interest on credit card services from the purview of the said exemption notification.
On a plain reading of the Notification dated 28th June 2017, it is clear that the interest involved in Credit Card Services is not exempted from the collection of Tax. The Hon’ble Court has rightly held that IGST is applicable on the Interest Component of EMI of Credit Card services. The Court while dismissing the petition also held the proposition “purpose of the notification providing for exemption should not be defeated nor those who may be entitled to it are to be deprived by interpreting the notification which may give it some meaning other than what is clearly and plainly flowing from it”.
Author(s) Name: Snehil Rai (Thakur Ramnarayan College of Law)
 Unreported Judgement, Writ Petition No. 547 of 2019, decided on 24.06.2002, Calcutta HC, 1
 Supra note 1
 Supra Note 1.
 Federal Bank. Ltd. v. Sagar Thomas and Ors., (2003)10 SCC 733.
 Om Prakash Srivastava v. Union of India, (2006) 6 SCC 207.
 Collector of Central Excise v. Himalayan Co-operative Milk Production (2000) 8 SCC 642.