BUSY is a simple, yet powerful GST / VAT compliant Business Accounting Software that has everything you need to grow your business.
EMIs (Equated Monthly Instalments) make it easier to buy things like phones, furniture, cars, and even insurance. But did you know that GST also applies to some parts of your EMI? Whether you’re using a loan or a credit card, this guide explains how gst on emi is applied and what you’re really paying each month.
First, let’s break it down:
So, the gst on emi is not a flat charge on the full EMI—it’s charged only on services involved in processing and maintaining the loan.
| Component | GST Applicable? | GST Rate |
|---|---|---|
| Principal repayment | No ❌ | – |
| Interest (for banks/NBFCs) | No ❌ | – |
| Processing fee | Yes ✅ | 18% |
| Foreclosure or penalty fee | Yes ✅ | 18% |
| Credit card EMI conversion | Yes ✅ | 18% |
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So, the gst on credit card emi is mainly on:
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Let’s look at an example of EMI with GST:
Monthly EMI will include principal + interest, and GST will apply only to one-time charges unless otherwise stated.
So, gst on emi payment appears in the initial charges, not the monthly instalments (in most cases).
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| Loan Purpose | ITC Available? |
|---|---|
| Personal loan | No ❌ |
| Business loan | Yes ✅ |
| Equipment on EMI (for business use) | Yes ✅ |
| Consumer durable EMI (TV, phone) | No ❌ |
You can claim Input Tax Credit on GST paid on loan processing fees only if the loan is for business use.
Understanding gst on emi helps you avoid surprises on your monthly bills and also ensures proper tax planning, especially if you’re using loans or credit for business expenses.
BUSY is a simple, yet powerful GST / VAT compliant Business Accounting Software that has everything you need to grow your business.