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One of the commonly used features of credit cards is the option to convert purchases into Equated Monthly Instalments (EMIs). This makes it easier to manage upfront expenses by spreading payments over a fixed tenure.
With the introduction of the Goods and Services Tax (GST), GST on credit card EMI has become an important cost consideration, as GST applies to certain charges linked to EMI conversion.
GST on credit card EMI in India is currently levied at 18%. This rate applies when outstanding credit card dues are converted into EMIs and is charged on specific components rather than the full purchase amount.
Earlier, EMI conversion and credit card services attracted a 15% service tax. This was replaced by GST, standardising GST for credit card EMI across issuers and transaction types.
| Transaction Type | GST Rate | Example Amount | GST Charged |
|---|---|---|---|
EMI interest |
18% |
₹1,000 |
₹180 |
Processing fee |
18% |
₹500 |
₹90 |
Late payment charge |
18% |
₹300 |
₹54 |
When a transaction is converted into EMI, GST on EMIs are not applied to the principal purchase value. Instead, GST is calculated on the interest component and any processing fee charged by the card issuer.
For example, if a ₹10,000 purchase is converted into EMI and incurs ₹1,000 as interest, the GST of 18% adds ₹180 to the payable amount. If an additional ₹500 processing fee is charged, GST of ₹90 is applied to that fee as well.
In cases where EMIs function similarly to short‑term lending, GST on credit card loan EMI applies only to service‑related charges and not to the loan principal. This structure ensures GST is levied strictly on financial services provided.
Understanding GST on credit card EMI becomes clearer when viewed through examples. The table below shows how total cost changes after GST application:
| Loan Amount | EMI Interest | Processing Fee | GST @ 18% | Total Extra Cost |
|---|---|---|---|---|
₹20,000 |
₹1,200 |
₹600 |
₹324 |
₹1,924 |
₹50,000 |
₹3,000 |
₹1,000 |
₹720 |
₹4,720 |
₹1,00,000 |
₹6,000 |
₹1,500 |
₹1,350 |
₹8,850 |
These examples highlight how GST increases the effective EMI cost even when the purchase amount remains unchanged.
The impact of GST on credit cards extends beyond just EMI conversion. While GST simplified indirect taxation, it also introduced uniform charges across multiple credit card services.
For GST on credit card EMI, this means:
GST applies even on no‑cost EMI, where interest appears waived but processing fees attract tax.
Annual membership fees attract 18% GST.
Delayed EMIs incur GST on both penalty and interest.
Overall, GST for credit card EMI has made EMI‑based spending more transparent, though slightly more expensive due to taxation on service components.
Credit card–related charges, including EMI interest, processing fees, and other financial service charges, are classified under a specific Services Accounting Code (SAC) used for GST purposes. This code groups credit card and related financial services under a single category, which is taxed uniformly at 18% regardless of the specific charge involved.
| Description of Services | SAC Code | Rate |
|---|---|---|
Financial and related services |
9971 |
18% |
Input Tax Credit (ITC) is a mechanism that allows businesses to offset the GST they've paid on eligible expenses against their own GST liability. For GST paid on credit card or bank-related charges, ITC is generally available and is not restricted under Section 17(5) of the CGST Act.
To claim this credit, certain conditions need to be met:
● A valid tax invoice, debit note, or other prescribed tax document must be available.
● The underlying goods or services must have actually been received.
● The GST charged must have been paid to the government, either in cash or through ITC.
● The relevant GST return under Section 39 of the CGST Act must be filed.
These conditions apply uniformly, and businesses should retain proper documentation to support any ITC claim on credit card–related charges.
GST applies because credit card services, including EMI processing, interest, and fees, are treated as taxable financial services. GST on credit card EMI applies specifically to service components such as interest and processing charges.
No. GST is charged only once per applicable service, such as EMI conversion or late payment fees. Full repayment without EMI conversion does not attract duplicate GST.
GST on credit card EMI transactions is charged at 18% and applies to interest and processing fees, not to the principal transaction amount.
Yes. Even in no‑cost EMI offers, GST may apply to processing fees or hidden service charges, making it part of the total payable cost.
The GST rate on credit card EMI is 18%, as per current GST regulations, and applies uniformly across card issuers.
Yes. Credit card annual and joining fees are subject to 18% GST, regardless of card type.
Input tax credit may be available only for eligible business expenses, subject to GST compliance and documentation requirements.
GST on credit card EMI isn't something the cardholder needs to calculate separately — it's a flat 18% applied automatically by the card issuer on components such as the EMI interest and processing fee, and it's reflected directly in the billing statement.
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