--- title: "New GST on EMI 2026: 18% Rate on EMI, Credit Card & Loan Payments" description: "New GST rate on EMI in 2026 is 18% on processing fees and loan EMI service charges. Apply the correct GST rate automatically with Busy on every invoice." canonical: "https://busy.in/gst-rates/emi/" author: "Susheel Kumar" published: "2025-05-16T04:51:46.000Z" category: "GST Rates" --- - GST does not apply to the principal or interest of EMIs, only to processing and penalty fees, which are taxed at 18%. - Credit card EMI conversions also incur an 18% GST on processing and conversion fees, but not on the interest. - GST on EMI payments mainly affects one-time charges like processing fees, not the monthly instalments. - Input Tax Credit on GST paid for loan processing fees is available only for business loans, not personal loans. - Understanding GST on EMI helps with financial planning and avoiding unexpected charges. # New GST on EMIs: Loans and Financial Services Tax 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. ## New GST Rate on EMI & Loan Charges in India The Government of India is updating GST rates effective after **22 Sep 2025**. Below are the **expected new GST rates** for EMI and loan-related components (no compensation cess). ## When Does GST Apply on EMI? | Component | GST Applicable? | New 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% | Note: Core loan amounts and interest are outside GST; service/processing-type charges attract GST. ## Understanding Old GST on EMIs ### (Old GST Rates – Applicable Until 21st September) First, let’s break it down: - EMI = Principal + Interest - GST is not charged on the principal, but it can apply to interest and processing fees, depending on the type of EMI or loan. 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. Live Demo Available Today ## Know Which Customers Have Pending EMI Payments Today Trusted by 6,00,000+ Users 4.6 Google Rating \* No credit card required ## When Does GST Apply on EMI? | 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% | **Get a Free Trial –** [**Best Accounting Software For Small Business**](https://busy.in/accounting-software/) ## GST on Credit Card EMI - Banks/NBFCs charge a conversion or handling fee - GST @ 18% is applied on these charges - Interest charged monthly is not taxed, but fees are So, the **gst on credit card emi** is mainly on: - Processing/conversion fees - Late payment charges - Prepayment penalties **Get a Free Trial –** [**Best GST Accounting Software For Small Business**](https://busy.in/accounting-software/gst-accounting/) ## GST on EMI Payment: How It Appears Let’s look at an example of EMI with GST: - Product price: ₹50,000 - Loan tenure: 6 months - Processing fee: ₹500 - GST on processing fee: ₹90 (18%) - Total upfront cost: ₹590 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). **Get a Free Demo –** [**Best Billing and Invoicing Software**](https://busy.in/accounting-software/invoicing-and-gst-billing/) ## Can You Claim Input Tax Credit (ITC) on EMI GST? | 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**](https://busy.in/gst/what-expenses-can-be-claimed-as-itc/) on GST paid on loan processing fees only if the loan is for business use. ## Conclusion 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. ## About the author **Susheel Kumar** I am a Chartered Accountant with over 20 years of experience and a finance content writer. I focus on educating people about finance and taxation. I have written many blog posts on finance, taxation, trading, and investment on the BUSY website. My goal is to increase financial understanding by making complex concepts easier to grasp and to support educational programs in India. ## Frequently asked questions ### Is GST charged on the EMI itself? No, GST on EMI is not charged on principal or interest. It applies to fees like processing and prepayment charges. ### What is the GST on credit card EMI? GST is charged at **18%** on processing and conversion fees during EMI setup or cancellation. ### Is there GST on EMI interest? No. Regular interest on loans is exempt from GST. ### Can I claim GST credit on EMI-related charges? Yes, if the EMI is for business use, and you're GST-registered. ### How do I check the GST in my EMI payment? Check your loan or card statement for separate GST charges on fees—not the EMI amount itself. ## Related articles - [New GST on Skincare Products: Rate, Branding & Retail Pricing](https://busy.in/gst-rates/skincare-products/) - [New GST on Industrial Machinery: Slabs, ITC & MSME Effect](https://busy.in/gst-rates/industrial-machinery/) - [New GST on Restaurant Meals: Dine-in, Takeaway & Delivery Compared](https://busy.in/gst-rates/restaurant-meals/) - [New GST on Kitchen Utensils: What’s Taxed and What’s Not?](https://busy.in/gst-rates/kitchen-utensils/) - [New GST on Online Education: Rate, Exemptions & EdTech Impact](https://busy.in/gst-rates/online-education/) - [New GST on Packaging Materials: Tax Implication Across Industries](https://busy.in/gst-rates/packaging-materials/) - [New GST on Digital Marketing Services: Tax Rates & Input Credit Explained](https://busy.in/gst-rates/digital-marketing-services/) - [New GST on Pesticides: Rates, Agri-Exemptions & Sector Impact](https://busy.in/gst-rates/pesticides/) - [New GST on Butter: From Dairy to Dining – What You Pay](https://busy.in/gst-rates/butter/) - [GST on Honey: Rate, Applicability & Industry Outlook](https://busy.in/gst-rates/honey/)