Commissioner of GST and Central Excise Vs Citibank N.A.
Forum-Supreme Court of India
Date-9th December, 2021

Sub-Whether Interchange fees received out of Merchant Discount Rate(MDR) by the issuing bank from accepting bank in relation to credit card transactions carried on a customer is liable to be taxed to service tax in the hands of the bank collecting such interchange fees.

An interesting issue arose in this case whether the bank issuing credit card to its customer who collects interchange fees from the accepting bank is liable to service tax again when the MDR has already suffered service tax in the hands of the accepting bank. In a land mark decision where the two judges bench of Supreme Court were divided in their opinion and wrote dissenting judgement with Justice Kurien Joseph deciding in favour of the department whereas Justice Ravindra Bhatt dissenting and wrote separate judgement in favour of Citibank on the pretext that the issuing bank and accepting bank were providing single unified service to the customer and service tax being a value added tax, charging of service tax again on an amount which has suffered tax once, will amount to double taxation. Other issues of interest like what is the meaning of interest etc were also decided. This is no doubt a landmark decision which will implications in other matters of dispute also in relation to service tax also.

Now probably a larger bench will be constituted to settle the issue.

Incidentally, this judgement will have bearing on the Writ petition which is filed in Calcutta High Court in the case of Ramesh Kumar Patodia Vs Citibank N.A (WP No 547 of 2019) where the action of citibank in charging GST on the interest on loan which is disbursed through credit cards has been challenged.

Ramesh Patodia
10-12-2021