New GST on EMIs: Loans and Financial Services Tax
- GST is generally not applicable on the principal repayment or interest component of loan EMIs.
- Taxable charges such as loan processing fees, documentation charges, and service fees generally attract 18% GST.
- GST on credit card EMI applies at 18% on eligible service charges such as processing or conversion fees, not on the repayment of the principal amount.
- GST on EMI payments mainly affects additional charges and fees rather than the monthly instalment amount itself.
- Businesses may claim eligible Input Tax Credit on 18% GST paid on loan-related service charges if the expense is used for business purposes and GST conditions are satisfied.
- Understanding GST on EMI charges helps borrowers identify where GST applies and avoid unexpected costs.
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.
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| Component | GST Applicable? | New GST Rate (After 22 Sep 2025) | Old GST Rate (Before 22 Sep 2025) |
|---|---|---|---|
| Principal repayment | No ❌ | — | — |
| Interest on loans (banks/NBFCs) | No ❌ | — | — |
| Loan processing fee | Yes ✅ | 18% | 18% |
| Documentation/service charges | Yes ✅ | 18% | 18% |
| Foreclosure/prepayment charges | Yes ✅ | 18% | 18% |
| Credit card EMI processing/conversion fee | Yes ✅ | 18% | 18% |
Component
GST Applicable?
New GST Rate (After 22 Sep 2025)
Old GST Rate (Before 22 Sep 2025)
Component
GST Applicable?
New GST Rate (After 22 Sep 2025)
Old GST Rate (Before 22 Sep 2025)
Component
GST Applicable?
New GST Rate (After 22 Sep 2025)
Old GST Rate (Before 22 Sep 2025)
Component
GST Applicable?
New GST Rate (After 22 Sep 2025)
Old GST Rate (Before 22 Sep 2025)
Component
GST Applicable?
New GST Rate (After 22 Sep 2025)
Old GST Rate (Before 22 Sep 2025)
Component
GST Applicable?
New GST Rate (After 22 Sep 2025)
Old GST Rate (Before 22 Sep 2025)
Note: No major GST rate change has been introduced for EMI-related charges. GST generally applies to taxable service components such as processing fees and other charges, while loan principal and interest are generally outside GST.
Understanding GST on EMIs
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.
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GST on Credit Card EMI
Banks/NBFCs may charge a conversion or handling fee when a transaction is converted into EMI. GST at 18% applies to eligible taxable charges such as processing or conversion fees.
The gst on credit card emi generally applies to:
- Processing/conversion fees
- Other taxable service charges related to EMI facilities
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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 generally consists of principal repayment and interest. GST usually applies to taxable charges such as processing fees and service charges, rather than the loan repayment amount itself.
So, gst on emi payment is generally reflected in additional charges such as processing fees, rather than the principal repayment component of monthly instalments.
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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 ❌ |
Loan Purpose
ITC Available?
Loan Purpose
ITC Available?
Loan Purpose
ITC Available?
Loan Purpose
ITC Available?
You can claim Input Tax Credit 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.
