There is no direct tax on credit cards, but you can consider the GST imposed by the government on some transaction related charges as a tax. Let us understand these charges:
GST on Annual Fee: At present, GST is levied at the rate of 18% on the annual fee of credit card charged every year.
GST on interest payment: If you do not pay your credit card bill in full on time, then GST is also levied on the interest charged on the outstanding amount at the rate of 18%.
GST on EMI processing fee: If you convert any purchase into EMI, then 18% GST is also levied on the processing fee charged on it.
It is important to note that this GST is not a direct tax, but a service tax levied by the government.
Apart from this, there is another fee which is related to foreign transactions:
Foreign Currency Mark-up Fee: When you make a purchase abroad, the bank converts that currency into Indian Rupees when you make payment through your credit card. During this, the bank can charge some amount on the exchange rate, which is called foreign currency mark-up fee. There is no separate tax on this.
