sameer (Employed) 06 May 2008

Credit Card_Tax

My friend was admitted in a reputed Hospitals for 7 days.At the time of discharge, my friend made the payment thru credit card. But the Hospital collected 2 % as tax on the amount swiped by him.

Can any body pl tell me that whether it lehgal or illegal.

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7 Replies

JAYARAJAN P.R. (ADVOCATE ARBITRATOR AUTHOR COMMISSIONER OF OATHS AND EDITOR) 06 May 2008

Sir, That may be for service charge and not for tax, i think so.

Prakash Yedhula (Lawyer) 07 May 2008

As Mr.Jayaraman puts it, it is only Service Tax that is collected. Service tax has been levied on these back-end card transactions with effect from May 1, ’06. Generally, the invoice is the basis of service tax assessment.

Of the tax collected around 1.1% goes to the issuing bank, or the bank that has issued the credit or debit card, a small sum is credited to card issuers such as Visa or MasterCard, while the rest is retained by the acquiring bank.

Amit Sharma (Student) 14 May 2008

Dear Sammer. Those are serice charges and not in any way related to tax. Hope you are clear now...

Guest (n/a) 28 May 2008

Dear Only Petrol Pumps are allowed to deduct front-end Bank charges from the buyer if he make payment trough credit card. This 2% or such other extra charge is the bank commission, which shall latter be charged from seller by the bank. Usually, seller bears this charge from his own pocket but in few cases where goods are sold at competitive prices (mainly in cash/black market), seller charge 2% extra from buyer if payment is made through credit card. Legally, these extra charges are not valid and one can challenge this in consumer court.

(Guest)

The service charges are levied or collected because the user's card would be of a different bank than the seller bank. The cost of transaction for getting the money from your bank to the seller's bank is charged to you.

V Ramanujam (Service) 30 May 2008

I feel that the hospital authorities are trying to recoup from the customer the % of share that will be kept by the Banks as their charges in the credit card transactions. I do not think that it is incorrect so long as the hospital issue bill / chargeslip and report the entire amount received (incl 2%) as income

Advocate Pankaj Kumar Sharma (Direct Taxes ( Income Tax & Wealth Tax) Consultants alongwith Service Tax including Tax Planning) 06 June 2008

As per provisions of Finance Act, 1994, now the scope of Service Tax(ST) is extended. Presently, ST is levied on Credit/Debit card & other card services.