Is There Gst On Loan Interest

GST is not applicable on loan interest. Before the introduction of GST, service taxes were levied on loans. The rate of service taxes were 15%, whereas the rate of GST is 18%. As there was a 3% increase due to the change in the tax scheme, some people might have assumed that interest rates would also be affected. But GST is not levied on EMIs of the loan or on the payment of interest on the loan. It will be levied only on the processing charges and other charges that your lender would be charging you. 

The interest rates may vary from lender to lender. But no matter what the interest rate is, your interest rate costs won’t change. For example, assume your lender charges a processing fee of 1% on your personal loan amount. Your loan amount is Rs. 9 lakhs, therefore you would have to pay Rs. 9000 as a processing fee. On this amount, when 18% of GST is charged, you would have to pay an additional amount of Rs. 1,620 along with the processing fee.