GST on payment gateway fees, and how to claim it back

GST is charged on the fee, not on your payment

When a payment app takes a fee, GST is added to that fee and taken from your payment too:

Residual financial services under Heading 9971 attract 9% CGST + 9% SGST (or 18% IGST). GST is charged on the provider’s fee, never on the transaction amount. Applied by default where a provider does not state the rate.

So a card payment through Razorpay costs 2% + 18% GST: the GST is a share of the fee, not of the payment.

When there’s no GST

Services by an acquiring bank in relation to settlement of up to ₹2,000 in a single card transaction are exempt (Sl. 34, Notif. 12/2017). CBIC Circular 245/02/2025 extends this to RBI-regulated payment aggregators for the settlement function only, not payment gateway services. Whether a given gateway’s fee qualifies depends on how it is billed, so the app applies it only where the provider states it (e.g. Zoho, Stripe).

You can see this in Zoho Payments’ published card fee, which charges no GST on smaller card payments: up to ₹2,000: 2% (no GST) · above ₹2,000: 2% + 18% GST.

Getting the GST back: input tax credit

If your business is GST-registered, you may be able to claim the GST on these fees back as input tax credit (ITC):

ITC is available on GST charged for supplies used in the course of business, subject to s.16(2) conditions (tax invoice, receipt, tax paid by supplier, returns filed), time limits (s.16(4)) and blocked credits (s.17(5)). The app cannot determine eligibility; it defaults to 0%. ITC is a tax credit, not cashback.

ITC lowers your real cost, but it’s a tax credit you claim in your returns, not cashback. It doesn’t change the amount that lands in your account. In Clarifee’s calculator, open the GST credit chip to see your cost after ITC.

Don’t mix it up with GST on your sale

The GST you charge your own customer is a different thing: you collect it and pay it to the government. It isn’t a payment cost, and Clarifee never counts it as one. See the methodology for a worked example.