No Cost EMI Explained: Is No Cost EMI Actually Free?

[TechnoFino]

If you are a credit card user, there is a high probability that you have made purchases using the EMI (Equated Monthly Installment) option. There are a few ways to avail of EMI options:

[Article Link: https://www.technofino.in/no-cost-emi-explained-is-no-cost-emi-actually-free/]

1. Purchase directly from the merchant at EMI.
2. Pay the full amount initially and then convert the charge into EMI by contacting your card issuer.
3. Opt for No Cost EMI.

When we make a purchase at EMI or convert our purchases to EMI through the bank, the bank charges us interest on the principal amount. It is a short-term personal loan. However, the bank does not report these separately to the credit bureaus.
In the case of No Cost EMI, as the name suggests, it implies EMI without any interest. But is it truly interest-free? Let's explore the charges associated with No Cost EMI to find out.
So, when you decide to make a purchase using the No Cost EMI option, let's consider buying a Samsung Galaxy S23 Ultra 5G with a cost of Rs. 1,24,999 on Amazon. You can choose to use a HDFC Bank credit card for the transaction and you will be presented with various tenure options to select from.

As you go through the options, you will notice that there is a total interest amount mentioned along with an equivalent discount for each tenure.


In reality, banks do not offer interest-free EMIs. Instead, it is the merchant who provides an upfront discount equivalent to the interest amount that the bank would charge if you were to opt for the No Cost EMI. Essentially, the bank still applies their interest as per their policy, but you receive an immediate discount of the same amount from the merchant.

In this scenario, if you choose the 24-month No Cost EMI option, you will be charged a total of Rs. 1,06,372. You will receive an upfront discount of Rs. 18,627 from the merchant (Amazon in this case), which offsets the future interest charges.

Now, let's take a look at the charges associated with No Cost EMI:

1. Processing Fees: Typically, banks charge a flat processing fee if you choose the No Cost EMI option. This fee can range from Rs. 99 to Rs. 300.
2. GST on Interest: Although customers receive the interest amount as an upfront discount, banks still levy GST (Goods and Services Tax) on the interest component of the credit card EMI. Therefore, for each EMI, you will have to pay 18% GST on the interest amount.
3. Foreclosure Charges: If you decide to cancel the EMI at any time, banks usually impose foreclosure charges. These charges can range from 2% to 5% of the remaining EMI amount.

It is important to be aware of these charges before opting for the No Cost EMI option.

Many people often misunderstand the concept of "No Cost EMI" and mistakenly believe that there will be no interest charged by the bank if they choose this option. This misconception can lead to feelings of being cheated once they discover the reality behind No Cost EMI. It is essential for individuals to understand all the associated fees and how No Cost EMI works before utilizing it.

Here's a helpful tip for you: Consider selecting the maximum available tenure when opting for a No Cost EMI. By doing so, you can receive the maximum interest discount. After the EMI is posted on your credit card account, which typically takes 3 to 7 days, contact your card issuer and cancel the EMI. The bank will ask you to pay the remaining amount. Even after paying foreclosure charges, significant savings can be achieved.

Let's refer back to the example we discussed earlier with the Samsung Galaxy S23 Ultra 5G. If you choose the 24-month EMI tenure, you will receive an upfront discount of Rs. 18,627, resulting in a charge of Rs. 1,06,372. However, if you cancel your EMI a few days after the purchase, even after paying a 3% foreclosure fee (approximately Rs. 3,035, calculated as 3% of the remaining amount after deducting the upfront discount), you can save nearly Rs. 15,500 as an upfront discount.
However, it is crucial to perform your own calculations and consider the terms and conditions before employing such tactics.

 

[SSV]

If you are a credit card user, there is a high probability that you have made purchases using the EMI (Equated Monthly Installment) option. There are a few ways to avail of EMI options:

[Article Link: https://www.technofino.in/no-cost-emi-explained-is-no-cost-emi-actually-free/]

1. Purchase directly from the merchant at EMI.
2. Pay the full amount initially and then convert the charge into EMI by contacting your card issuer.
3. Opt for No Cost EMI.

When we make a purchase at EMI or convert our purchases to EMI through the bank, the bank charges us interest on the principal amount. It is a short-term personal loan. However, the bank does not report these separately to the credit bureaus.
In the case of No Cost EMI, as the name suggests, it implies EMI without any interest. But is it truly interest-free? Let's explore the charges associated with No Cost EMI to find out.
So, when you decide to make a purchase using the No Cost EMI option, let's consider buying a Samsung Galaxy S23 Ultra 5G with a cost of Rs. 1,24,999 on Amazon. You can choose to use a HDFC Bank credit card for the transaction and you will be presented with various tenure options to select from.

As you go through the options, you will notice that there is a total interest amount mentioned along with an equivalent discount for each tenure.


In reality, banks do not offer interest-free EMIs. Instead, it is the merchant who provides an upfront discount equivalent to the interest amount that the bank would charge if you were to opt for the No Cost EMI. Essentially, the bank still applies their interest as per their policy, but you receive an immediate discount of the same amount from the merchant.

In this scenario, if you choose the 24-month No Cost EMI option, you will be charged a total of Rs. 1,06,372. You will receive an upfront discount of Rs. 18,627 from the merchant (Amazon in this case), which offsets the future interest charges.

Now, let's take a look at the charges associated with No Cost EMI:

1. Processing Fees: Typically, banks charge a flat processing fee if you choose the No Cost EMI option. This fee can range from Rs. 99 to Rs. 300.
2. GST on Interest: Although customers receive the interest amount as an upfront discount, banks still levy GST (Goods and Services Tax) on the interest component of the credit card EMI. Therefore, for each EMI, you will have to pay 18% GST on the interest amount.
3. Foreclosure Charges: If you decide to cancel the EMI at any time, banks usually impose foreclosure charges. These charges can range from 2% to 5% of the remaining EMI amount.

It is important to be aware of these charges before opting for the No Cost EMI option.

Many people often misunderstand the concept of "No Cost EMI" and mistakenly believe that there will be no interest charged by the bank if they choose this option. This misconception can lead to feelings of being cheated once they discover the reality behind No Cost EMI. It is essential for individuals to understand all the associated fees and how No Cost EMI works before utilizing it.

Here's a helpful tip for you: Consider selecting the maximum available tenure when opting for a No Cost EMI. By doing so, you can receive the maximum interest discount. After the EMI is posted on your credit card account, which typically takes 3 to 7 days, contact your card issuer and cancel the EMI. The bank will ask you to pay the remaining amount. Even after paying foreclosure charges, significant savings can be achieved.

Let's refer back to the example we discussed earlier with the Samsung Galaxy S23 Ultra 5G. If you choose the 24-month EMI tenure, you will receive an upfront discount of Rs. 18,627, resulting in a charge of Rs. 1,06,372. However, if you cancel your EMI a few days after the purchase, even after paying a 3% foreclosure fee (approximately Rs. 3,035, calculated as 3% of the remaining amount after deducting the upfront discount), you can save nearly Rs. 15,500 as an upfront discount.
However, it is crucial to perform your own calculations and consider the terms and conditions before employing such tactics.

As usual, a very nice and neat explanation..
The last para is important and doing the maths accordingly will greatly help in making a wise choice...

 

[Rkr]

If you are a credit card user, there is a high probability that you have made purchases using the EMI (Equated Monthly Installment) option. There are a few ways to avail of EMI options:

[Article Link: https://www.technofino.in/no-cost-emi-explained-is-no-cost-emi-actually-free/]

1. Purchase directly from the merchant at EMI.
2. Pay the full amount initially and then convert the charge into EMI by contacting your card issuer.
3. Opt for No Cost EMI.

When we make a purchase at EMI or convert our purchases to EMI through the bank, the bank charges us interest on the principal amount. It is a short-term personal loan. However, the bank does not report these separately to the credit bureaus.
In the case of No Cost EMI, as the name suggests, it implies EMI without any interest. But is it truly interest-free? Let's explore the charges associated with No Cost EMI to find out.
So, when you decide to make a purchase using the No Cost EMI option, let's consider buying a Samsung Galaxy S23 Ultra 5G with a cost of Rs. 1,24,999 on Amazon. You can choose to use a HDFC Bank credit card for the transaction and you will be presented with various tenure options to select from.

As you go through the options, you will notice that there is a total interest amount mentioned along with an equivalent discount for each tenure.


In reality, banks do not offer interest-free EMIs. Instead, it is the merchant who provides an upfront discount equivalent to the interest amount that the bank would charge if you were to opt for the No Cost EMI. Essentially, the bank still applies their interest as per their policy, but you receive an immediate discount of the same amount from the merchant.

In this scenario, if you choose the 24-month No Cost EMI option, you will be charged a total of Rs. 1,06,372. You will receive an upfront discount of Rs. 18,627 from the merchant (Amazon in this case), which offsets the future interest charges.

Now, let's take a look at the charges associated with No Cost EMI:

1. Processing Fees: Typically, banks charge a flat processing fee if you choose the No Cost EMI option. This fee can range from Rs. 99 to Rs. 300.
2. GST on Interest: Although customers receive the interest amount as an upfront discount, banks still levy GST (Goods and Services Tax) on the interest component of the credit card EMI. Therefore, for each EMI, you will have to pay 18% GST on the interest amount.
3. Foreclosure Charges: If you decide to cancel the EMI at any time, banks usually impose foreclosure charges. These charges can range from 2% to 5% of the remaining EMI amount.

It is important to be aware of these charges before opting for the No Cost EMI option.

Many people often misunderstand the concept of "No Cost EMI" and mistakenly believe that there will be no interest charged by the bank if they choose this option. This misconception can lead to feelings of being cheated once they discover the reality behind No Cost EMI. It is essential for individuals to understand all the associated fees and how No Cost EMI works before utilizing it.

Here's a helpful tip for you: Consider selecting the maximum available tenure when opting for a No Cost EMI. By doing so, you can receive the maximum interest discount. After the EMI is posted on your credit card account, which typically takes 3 to 7 days, contact your card issuer and cancel the EMI. The bank will ask you to pay the remaining amount. Even after paying foreclosure charges, significant savings can be achieved.

Let's refer back to the example we discussed earlier with the Samsung Galaxy S23 Ultra 5G. If you choose the 24-month EMI tenure, you will receive an upfront discount of Rs. 18,627, resulting in a charge of Rs. 1,06,372. However, if you cancel your EMI a few days after the purchase, even after paying a 3% foreclosure fee (approximately Rs. 3,035, calculated as 3% of the remaining amount after deducting the upfront discount), you can save nearly Rs. 15,500 as an upfront discount.
However, it is crucial to perform your own calculations and consider the terms and conditions before employing such tactics.

Helpful,accurate and excellant information on No cost EMI and how to save further..

Hats off to you Dada..

 

[kvagarwal]

If you are a credit card user, there is a high probability that you have made purchases using the EMI (Equated Monthly Installment) option. There are a few ways to avail of EMI options:

[Article Link: https://www.technofino.in/no-cost-emi-explained-is-no-cost-emi-actually-free/]

1. Purchase directly from the merchant at EMI.
2. Pay the full amount initially and then convert the charge into EMI by contacting your card issuer.
3. Opt for No Cost EMI.

When we make a purchase at EMI or convert our purchases to EMI through the bank, the bank charges us interest on the principal amount. It is a short-term personal loan. However, the bank does not report these separately to the credit bureaus.
In the case of No Cost EMI, as the name suggests, it implies EMI without any interest. But is it truly interest-free? Let's explore the charges associated with No Cost EMI to find out.
So, when you decide to make a purchase using the No Cost EMI option, let's consider buying a Samsung Galaxy S23 Ultra 5G with a cost of Rs. 1,24,999 on Amazon. You can choose to use a HDFC Bank credit card for the transaction and you will be presented with various tenure options to select from.

As you go through the options, you will notice that there is a total interest amount mentioned along with an equivalent discount for each tenure.


In reality, banks do not offer interest-free EMIs. Instead, it is the merchant who provides an upfront discount equivalent to the interest amount that the bank would charge if you were to opt for the No Cost EMI. Essentially, the bank still applies their interest as per their policy, but you receive an immediate discount of the same amount from the merchant.

In this scenario, if you choose the 24-month No Cost EMI option, you will be charged a total of Rs. 1,06,372. You will receive an upfront discount of Rs. 18,627 from the merchant (Amazon in this case), which offsets the future interest charges.

Now, let's take a look at the charges associated with No Cost EMI:

1. Processing Fees: Typically, banks charge a flat processing fee if you choose the No Cost EMI option. This fee can range from Rs. 99 to Rs. 300.
2. GST on Interest: Although customers receive the interest amount as an upfront discount, banks still levy GST (Goods and Services Tax) on the interest component of the credit card EMI. Therefore, for each EMI, you will have to pay 18% GST on the interest amount.
3. Foreclosure Charges: If you decide to cancel the EMI at any time, banks usually impose foreclosure charges. These charges can range from 2% to 5% of the remaining EMI amount.

It is important to be aware of these charges before opting for the No Cost EMI option.

Many people often misunderstand the concept of "No Cost EMI" and mistakenly believe that there will be no interest charged by the bank if they choose this option. This misconception can lead to feelings of being cheated once they discover the reality behind No Cost EMI. It is essential for individuals to understand all the associated fees and how No Cost EMI works before utilizing it.

Here's a helpful tip for you: Consider selecting the maximum available tenure when opting for a No Cost EMI. By doing so, you can receive the maximum interest discount. After the EMI is posted on your credit card account, which typically takes 3 to 7 days, contact your card issuer and cancel the EMI. The bank will ask you to pay the remaining amount. Even after paying foreclosure charges, significant savings can be achieved.

Let's refer back to the example we discussed earlier with the Samsung Galaxy S23 Ultra 5G. If you choose the 24-month EMI tenure, you will receive an upfront discount of Rs. 18,627, resulting in a charge of Rs. 1,06,372. However, if you cancel your EMI a few days after the purchase, even after paying a 3% foreclosure fee (approximately Rs. 3,035, calculated as 3% of the remaining amount after deducting the upfront discount), you can save nearly Rs. 15,500 as an upfront discount.
However, it is crucial to perform your own calculations and consider the terms and conditions before employing such tactics.

@TechnoFino
Want to save foreclosure charge and processing fees as well?
You can cancel not foreclose EMI conversion and pay the full amount upfront.
Just contact the bank after 3 days of transaction and ask for cancellation. Get processing fees and GST refunded. 🔥

For Axis bank, they allow to cancel within 30 days,
4 days for HDFC.

Ref: Check screenshot attached.

 

[Tejo]

If you are a credit card user, there is a high probability that you have made purchases using the EMI (Equated Monthly Installment) option. There are a few ways to avail of EMI options:

[Article Link: https://www.technofino.in/no-cost-emi-explained-is-no-cost-emi-actually-free/]

1. Purchase directly from the merchant at EMI.
2. Pay the full amount initially and then convert the charge into EMI by contacting your card issuer.
3. Opt for No Cost EMI.

When we make a purchase at EMI or convert our purchases to EMI through the bank, the bank charges us interest on the principal amount. It is a short-term personal loan. However, the bank does not report these separately to the credit bureaus.
In the case of No Cost EMI, as the name suggests, it implies EMI without any interest. But is it truly interest-free? Let's explore the charges associated with No Cost EMI to find out.
So, when you decide to make a purchase using the No Cost EMI option, let's consider buying a Samsung Galaxy S23 Ultra 5G with a cost of Rs. 1,24,999 on Amazon. You can choose to use a HDFC Bank credit card for the transaction and you will be presented with various tenure options to select from.

As you go through the options, you will notice that there is a total interest amount mentioned along with an equivalent discount for each tenure.


In reality, banks do not offer interest-free EMIs. Instead, it is the merchant who provides an upfront discount equivalent to the interest amount that the bank would charge if you were to opt for the No Cost EMI. Essentially, the bank still applies their interest as per their policy, but you receive an immediate discount of the same amount from the merchant.

In this scenario, if you choose the 24-month No Cost EMI option, you will be charged a total of Rs. 1,06,372. You will receive an upfront discount of Rs. 18,627 from the merchant (Amazon in this case), which offsets the future interest charges.

Now, let's take a look at the charges associated with No Cost EMI:

1. Processing Fees: Typically, banks charge a flat processing fee if you choose the No Cost EMI option. This fee can range from Rs. 99 to Rs. 300.
2. GST on Interest: Although customers receive the interest amount as an upfront discount, banks still levy GST (Goods and Services Tax) on the interest component of the credit card EMI. Therefore, for each EMI, you will have to pay 18% GST on the interest amount.
3. Foreclosure Charges: If you decide to cancel the EMI at any time, banks usually impose foreclosure charges. These charges can range from 2% to 5% of the remaining EMI amount.

It is important to be aware of these charges before opting for the No Cost EMI option.

Many people often misunderstand the concept of "No Cost EMI" and mistakenly believe that there will be no interest charged by the bank if they choose this option. This misconception can lead to feelings of being cheated once they discover the reality behind No Cost EMI. It is essential for individuals to understand all the associated fees and how No Cost EMI works before utilizing it.

Here's a helpful tip for you: Consider selecting the maximum available tenure when opting for a No Cost EMI. By doing so, you can receive the maximum interest discount. After the EMI is posted on your credit card account, which typically takes 3 to 7 days, contact your card issuer and cancel the EMI. The bank will ask you to pay the remaining amount. Even after paying foreclosure charges, significant savings can be achieved.

Let's refer back to the example we discussed earlier with the Samsung Galaxy S23 Ultra 5G. If you choose the 24-month EMI tenure, you will receive an upfront discount of Rs. 18,627, resulting in a charge of Rs. 1,06,372. However, if you cancel your EMI a few days after the purchase, even after paying a 3% foreclosure fee (approximately Rs. 3,035, calculated as 3% of the remaining amount after deducting the upfront discount), you can save nearly Rs. 15,500 as an upfront discount.
However, it is crucial to perform your own calculations and consider the terms and conditions before employing such tactics.

does there will be no negative when cancel emi's ?

i have heard sbi,icici have cancelled cards. may be heavly they did.

 

[TechnoFino]

does there will be no negative when cancel emi's ?

i have heard sbi,icici have cancelled cards. may be heavly they did.

if do this multiple times in short period of time, then yes... bank might cancel your card.

 

[Dhruvkumar]

If you are a credit card user, there is a high probability that you have made purchases using the EMI (Equated Monthly Installment) option. There are a few ways to avail of EMI options:

[Article Link: https://www.technofino.in/no-cost-emi-explained-is-no-cost-emi-actually-free/]

1. Purchase directly from the merchant at EMI.
2. Pay the full amount initially and then convert the charge into EMI by contacting your card issuer.
3. Opt for No Cost EMI.

When we make a purchase at EMI or convert our purchases to EMI through the bank, the bank charges us interest on the principal amount. It is a short-term personal loan. However, the bank does not report these separately to the credit bureaus.
In the case of No Cost EMI, as the name suggests, it implies EMI without any interest. But is it truly interest-free? Let's explore the charges associated with No Cost EMI to find out.
So, when you decide to make a purchase using the No Cost EMI option, let's consider buying a Samsung Galaxy S23 Ultra 5G with a cost of Rs. 1,24,999 on Amazon. You can choose to use a HDFC Bank credit card for the transaction and you will be presented with various tenure options to select from.

As you go through the options, you will notice that there is a total interest amount mentioned along with an equivalent discount for each tenure.


In reality, banks do not offer interest-free EMIs. Instead, it is the merchant who provides an upfront discount equivalent to the interest amount that the bank would charge if you were to opt for the No Cost EMI. Essentially, the bank still applies their interest as per their policy, but you receive an immediate discount of the same amount from the merchant.

In this scenario, if you choose the 24-month No Cost EMI option, you will be charged a total of Rs. 1,06,372. You will receive an upfront discount of Rs. 18,627 from the merchant (Amazon in this case), which offsets the future interest charges.

Now, let's take a look at the charges associated with No Cost EMI:

1. Processing Fees: Typically, banks charge a flat processing fee if you choose the No Cost EMI option. This fee can range from Rs. 99 to Rs. 300.
2. GST on Interest: Although customers receive the interest amount as an upfront discount, banks still levy GST (Goods and Services Tax) on the interest component of the credit card EMI. Therefore, for each EMI, you will have to pay 18% GST on the interest amount.
3. Foreclosure Charges: If you decide to cancel the EMI at any time, banks usually impose foreclosure charges. These charges can range from 2% to 5% of the remaining EMI amount.

It is important to be aware of these charges before opting for the No Cost EMI option.

Many people often misunderstand the concept of "No Cost EMI" and mistakenly believe that there will be no interest charged by the bank if they choose this option. This misconception can lead to feelings of being cheated once they discover the reality behind No Cost EMI. It is essential for individuals to understand all the associated fees and how No Cost EMI works before utilizing it.

Here's a helpful tip for you: Consider selecting the maximum available tenure when opting for a No Cost EMI. By doing so, you can receive the maximum interest discount. After the EMI is posted on your credit card account, which typically takes 3 to 7 days, contact your card issuer and cancel the EMI. The bank will ask you to pay the remaining amount. Even after paying foreclosure charges, significant savings can be achieved.

Let's refer back to the example we discussed earlier with the Samsung Galaxy S23 Ultra 5G. If you choose the 24-month EMI tenure, you will receive an upfront discount of Rs. 18,627, resulting in a charge of Rs. 1,06,372. However, if you cancel your EMI a few days after the purchase, even after paying a 3% foreclosure fee (approximately Rs. 3,035, calculated as 3% of the remaining amount after deducting the upfront discount), you can save nearly Rs. 15,500 as an upfront discount.
However, it is crucial to perform your own calculations and consider the terms and conditions before employing such tactics.

One thing you should add here is why banks do levy GST on interest because very few people understands this. Let me try this here.

Supoose you Price of product is ₹100(excluding GST) and GST is 10% so price for customer is ₹110.
Now if shopkeeper is selling product for ₹90 than GST will be 10% of ₹90 which ₹9 so price for customer is ₹99.

So in above example you can see shopkeeper reduced price by ₹10 but for customer it is changed by ₹11.

Now when you purchase something in No Cost EMI you get discount worth of interest deducted from price. So Invoice of product is of less price. again take above example where product is of ₹110(including GST) if ₹10 is interrest than invoice is made of ₹100 only where ₹90.90 is price and ₹9.10 is GST.
So here shopkeeper had to pay only ₹9.10 out of pocket for interrest payment not ₹10.

But But But assuming customer doesn't forclouse or cancel EMI than

In which price customer gets the product. Is it ₹110 os is it ₹100. Answer is ₹110 so GST of ₹10 needs to be paid but only ₹9.10 is paid.
So banks has to levy GST on intrest which would be ₹0.90 in total here. so banks do levy GST on No Cost EMI but not on other EMIs. So this money is actully going to shopkeeper who promised you 10% disocount but only provided 9.10 % in our example. So next time don't blame government but blame yourself for not thinking this thorough.

In case of forclosure or cancellation actual price of product in customer's hand goes down so does GST.

This hidden trick where shop and bank able to sneak some money out of your pocket while putting blame on government is legal but moral according to me and someone should file legal case on this on 'No Cost EMI' naming.

In this trick extra money which you'll pay will depends on 2 things GST rate on product and EMI interrest rate provided by bank. However on most cases you don't know EMI interrest rate taken by bank.

Example:-
1) ₹110 product (including GST)
GST 18%
Bank rate 16% annual
duration 6 months

₹105 loan and ₹5 would be interrest
so you would pay 18% GST on ₹5 which is ₹0.9

2)₹110 prodct(inclusing GST)
GST 18%
bank rate 22% annaul
duration 6 months

₹103 loan and ₹7 would be interrest
so you would pay 18% GST on ₹7 which is ₹1.26

so for same product with simple trick you have to pay ₹0.36 more and most of people won't even know on which rate bank is giving you loan.


@TechnoFino Can we create some presurre here by fighting legally.

 

[shivek]

One thing you should add here is why banks do levy GST on interest because very few people understands this. Let me try this here.

Supoose you Price of product is ₹100(excluding GST) and GST is 10% so price for customer is ₹110.
Now if shopkeeper is selling product for ₹90 than GST will be 10% of ₹90 which ₹9 so price for customer is ₹99.

So in above example you can see shopkeeper reduced price by ₹10 but for customer it is changed by ₹11.

Now when you purchase something in No Cost EMI you get discount worth of interest deducted from price. So Invoice of product is of less price. again take above example where product is of ₹110(including GST) if ₹10 is interrest than invoice is made of ₹100 only where ₹90.90 is price and ₹9.10 is GST.
So here shopkeeper had to pay only ₹9.10 out of pocket for interrest payment not ₹10.

But But But assuming customer doesn't forclouse or cancel EMI than

In which price customer gets the product. Is it ₹110 os is it ₹100. Answer is ₹110 so GST of ₹10 needs to be paid but only ₹9.10 is paid.
So banks has to levy GST on intrest which would be ₹0.90 in total here. so banks do levy GST on No Cost EMI but not on other EMIs. So this money is actully going to shopkeeper who promised you 10% disocount but only provided 9.10 % in our example. So next time don't blame government but blame yourself for not thinking this thorough.

In case of forclosure or cancellation actual price of product in customer's hand goes down so does GST.

This hidden trick where shop and bank able to sneak some money out of your pocket while putting blame on government is legal but moral according to me and someone should file legal case on this on 'No Cost EMI' naming.

In this trick extra money which you'll pay will depends on 2 things GST rate on product and EMI interrest rate provided by bank. However on most cases you don't know EMI interrest rate taken by bank.

Example:-
1) ₹110 product (including GST)
GST 18%
Bank rate 16% annual
duration 6 months

₹105 loan and ₹5 would be interrest
so you would pay 18% GST on ₹5 which is ₹0.9

2)₹110 prodct(inclusing GST)
GST 18%
bank rate 22% annaul
duration 6 months

₹103 loan and ₹7 would be interrest
so you would pay 18% GST on ₹7 which is ₹1.26

so for same product with simple trick you have to pay ₹0.36 more and most of people won't even know on which rate bank is giving you loan.


@TechnoFino Can we create some presurre here by fighting legally.

It does not work this way:
a.) GST is not for seller to keep, so it is not going to happen that GST charged by bank will be returned back to seller.
b.) All financial charges attract GST@18%. Be it normal EMI or No Cost EMI or EMI for loan taken on card, GST will always be charged on interest component. Even Processing Fee or Late payment Fee attracts GST @18%.
c.) GST varies from product to product, so if you calculate with product purchased on GST less than 18% you will always get a deficit.

Note: I am not a GST expert, some one from the field can chime in to share more details or make corrections.

I am sharing three calculations (refer snippets)
1. from my actual purchase, here I got Instant discount and NC EMI discount
2. derived from [1], I only removed the Additional discount to reflect the actual use case discussed here
3. Used same as [2] but changed GST rate to 10% to emphasize on point [c] mentioned above

 

[Mack]

How "no cost emi discount" is calculated?

 

[chacks18]

@TechnoFino
Want to save foreclosure charge and processing fees as well?
You can cancel not foreclose EMI conversion and pay the full amount upfront.
Just contact the bank after 3 days of transaction and ask for cancellation. Get processing fees and GST refunded. 🔥

For Axis bank, they allow to cancel within 30 days,
4 days for HDFC.

Ref: Check screenshot attached.

Which banks cancel the EMI? apart from Axis and HDFC?

 

[Dhruvkumar]

It does not work this way:
a.) GST is not for seller to keep, so it is not going to happen that GST charged by bank will be returned back to seller.
b.) All financial charges attract GST@18%. Be it normal EMI or No Cost EMI or EMI for loan taken on card, GST will always be charged on interest component. Even Processing Fee or Late payment Fee attracts GST @18%.
c.) GST varies from product to product, so if you calculate with product purchased on GST less than 18% you will always get a deficit.

Note: I am not a GST expert, some one from the field can chime in to share more details or make corrections.

I am sharing three calculations (refer snippets)
1. from my actual purchase, here I got Instant discount and NC EMI discount
2. derived from [1], I only removed the Additional discount to reflect the actual use case discussed here
3. Used same as [2] but changed GST rate to 10% to emphasize on point [c] mentioned above

You didn't understand what i was trying say

1. Yes GST paid back by you on interest component does not returned back to seller but what I'm trying to say is actually getting this money another way. (I've written article but will make it better)

2. You don't have to pay GST on interest on home loan or personal loan. GST levied on charges by bank but not on interest component. (you pay GST on processing fee for any type of loan but you don't pay GST on interest on home loan or personal loan)

 

[shivek]

You didn't understand what i was trying say

1. Yes GST paid back by you on interest component does not returned back to seller but what I'm trying to say is actually getting this money another way. (I've written article but will make it better)

2. You don't have to pay GST on interest on home loan or personal loan. GST levied on charges by bank but not on interest component. (you pay GST on processing fee for any type of loan but you don't pay GST on interest on home loan or personal loan)

Your intent might be different than what perceived through the content.
Not everyone is mature enough to decode everything and we should refrain from sharing half-baked information.
A plain reading simply infers that there is some sort of scam going on between Bank and Merchants.
Someone can take that content in it's entirety and share among others resulting in unnecessary chaos and confusions.
I may be sounding rude or arrogant but this is the harsh truth now a days, negativity spreads like wildfire.

Normal EMI mentioned in my previous post is for CC based loan, not to be understood as loan sourced out of CC such as HL or AL.

The bank charges GST simply because they are bound to obey the policies framed by the governing bodies and government.
The interest component of regular Loans (HL, PL, AL, etc) which are directly sourced through bank are exempt from GST but interest component of any sort of loan, say loan on card(be it within or over the CL), EMI, NC EMI, etc., rendered via CC or based on CC are not exempted.

Looking forward to your article to see the other side of coin and get more clarity.

Always open to learning.

 

[VISHESH_BANSAL]

2. You don't have to pay GST on interest on home loan or personal loan. GST levied on charges by bank but not on interest component. (you pay GST on processing fee for any type of loan but you don't pay GST on interest on home loan or personal loan)

There is an Act called CGST ACT,2017

As per CGST ACT, 2017 Interest paid for loans other than interest involved in Credit Card Services is Exempt.

That is why Interest paid in case of Home Loan or Personal Loan etc... do not attract GST since it is exempt as of now.

 

[Dhruvkumar]

Your intent might be different than what perceived through the content.
Not everyone is mature enough to decode everything and we should refrain from sharing half-baked information.
A plain reading simply infers that there is some sort of scam going on between Bank and Merchants.
Someone can take that content in it's entirety and share among others resulting in unnecessary chaos and confusions.
I may be sounding rude or arrogant but this is the harsh truth now a days, negativity spreads like wildfire.

Normal EMI mentioned in my previous post is for CC based loan, not to be understood as loan sourced out of CC such as HL or AL.

The bank charges GST simply because they are bound to obey the policies framed by the governing bodies and government.
The interest component of regular Loans (HL, PL, AL, etc) which are directly sourced through bank are exempt from GST but interest component of any sort of loan, say loan on card(be it within or over the CL), EMI, NC EMI, etc., rendered via CC or based on CC are not exempted.

Looking forward to your article to see the other side of coin and get more clarity.

Always open to learning.

You tell me did GST paid by seller changed inbetween No cost EMI or normal EMI? Answer is yes

Now you tell me you paid something extra in GST or not?

So effectively you have to pay extra GST because no cost EMI is thing where merchant is selling product lesser price(as per invoice product price is less)than you're getting (you have to pay interest) so if government doesn't levy GST here than it would be a GST loophole.

You're saying it's government rule but try to understand why government has to maks this rule.

If you can't understand leave but ni point of criticizing someone. I can say you same your intent can be different when you write normal EMI but not everyone is mature enough.

I'll update below article but try to understand it's complicated but this GST thing does help seller to have extra money.

Why Banks levy GST on No Cost EMI?

Recently @TechnoFino posted article about Cost behind No Cost EMI. I'm adding this as extension where I'll try to explain why banks levy GST on No Cost EMI but not in other EMIs and actully who is getting that money(Technically government but read below to know more) Suppose the price of the...

www.technofino.in

 

[Dhruvkumar]

There is an Act called CGST ACT,2017

As per CGST ACT, 2017 Interest paid for loans other than interest involved in Credit Card Services is Exempt.

That is why Interest paid in case of Home Loan or Personal Loan etc... do not attract GST since it is exempt as of now.

I know law but you don't know why this is law and why government has to lavy GST on credit card loan. If government doesn't lavy GST this trick can make anything GST free.


There is nothing illegally going on here but if you think if you buy thing in full payment or in cost EMI. Merchant does earn more in no cost EMI and you pay more in no cost EMI (not calculating processing fee because it goes to bank).

I tried to explain it here lot of improvement needs to be made but try to understand GST paid by merchant would be less when you buy thing in no cost EMI. While you pay more GST.

Why Banks levy GST on No Cost EMI?

Recently @TechnoFino posted article about Cost behind No Cost EMI. I'm adding this as extension where I'll try to explain why banks levy GST on No Cost EMI but not in other EMIs and actully who is getting that money(Technically government but read below to know more) Suppose the price of the...

www.technofino.in

 

[VISHESH_BANSAL]

I tried to explain it here lot of improvement needs to be made but try to understand GST paid by merchant would be less when you buy thing in no cost EMI. While you pay more GST

I agree GST paid by Merchant would be less in Case Merchant Gives instant NCEMI discount but you are ignoring the Fact that Merchant is giving a Hefty discount for giving us NCMI.


If NCEMI discount is 1000 and GST is 18% then only Merchant's GST Liability would be reduced by 180.

It is not like that Merchant will keep the difference in GST Liability caused by instant discount with him.
Whatever would be the GST Liability it is deposited to the Government.


Merchant is also giving discount of Rs.1000. If NCEMI discount is funded by Merchant then it would affect Merchant's Profit Margin.

But usually NCEMI discounts are funded by Brands

If you want to Avoid GST on Interest then Purchase the Product using Bajaj Finance Card.
But you will not use Bajaj Finance Card since you would lost Instant Bank Discount.

Now when You shop offline and avail NCEMI offers offline then We receive Interest as CashBack after 90 days usually.

In this Case Invoice value Remains Same as Product Original Price.

I would love to hear your Logical Explaination in this case "Why Banks Charge GST on Interest Component of EMI Txns done through Credit Cards



Even in Offline Shopping you do not want to pay GST on interest , you can avail Paper Finance from Bajaj, IDFC First, HDFC Bank etc... but again You may lost Bank specific additional discounts

So things can not happen as per our choice.
Brands prefer NCEMI discount as instant discount in case of online shopping
In case of offline Shopping Brands Prefer NCEMI Discount as Cashback after a certain period of time.


Since we are availing EMI facilty on Credit Cards, Interest and Processing fee would be there and as Per Law these charges would attract GST

 

[Dhruvkumar]

I agree GST paid by Merchant would be less in Case Merchant Gives instant NCEMI discount but you are ignoring the Fact that Merchant is giving a Hefty discount for giving us NCMI.


If NCEMI discount is 1000 and GST is 18% then only Merchant's GST Liability would be reduced by 180.

It is not like that Merchant will keep the difference in GST Liability caused by instant discount with him.
Whatever would be the GST Liability it is deposited to the Government.


Merchant is also giving discount of Rs.1000. If NCEMI discount is funded by Merchant then it would affect Merchant's Profit Margin.

But usually NCEMI discounts are funded by Brands

If you want to Avoid GST on Interest then Purchase the Product using Bajaj Finance Card.
But you will not use Bajaj Finance Card since you would lost Instant Bank Discount.

Now when You shop offline and avail NCEMI offers offline then We receive Interest as CashBack after 90 days usually.

In this Case Invoice value Remains Same as Product Original Price.

I would love to hear your Logical Explaination in this case "Why Banks Charge GST on Interest Component of EMI Txns done through Credit Cards



Even in Offline Shopping you do not want to pay GST on interest , you can avail Paper Finance from Bajaj, IDFC First, HDFC Bank etc... but again You may lost Bank specific additional discounts

So things can not happen as per our choice.
Brands prefer NCEMI discount as instant discount in case of online shopping
In case of offline Shopping Brands Prefer NCEMI Discount as Cashback after a certain period of time.


Since we are availing EMI facilty on Credit Cards, Interest and Processing fee would be there and as Per Law these charges would attract GST

So here I'm not saying that you should not buy things on no cost EMI it's always complicated to do. You can forclose EMI. You can cancel EMI. You may consider return on investment. You can consider inflation.

But i was trying to point out a trick which in my immediate circle no one knew.


No you said merchant provide discount. So there is 2 type of discounts here

1.) Extra discount :- if you're getting it probably better but it's less likely. I feel it's like very good credit card which will get devalued one day.

2.) Interest discount:- this gets reimbursed from commision from bank or NBFC. Do you really think merchants will just happily give customers where bank can give 16% interest. They get commission from bank and this commision does not attract GST.


So seller POV:
1) selling at 110 without NCEMI
Sell for 110 and pay GST on 110

2) selling at 110 with NCEMI
Sell at ₹103 pay GST on ₹103 get commission of ₹7

Now actual commision rates differ because it's more of volume like more people lesser commision(here argument from bank is our EMIs are encouraging to spend more) so if more people than pre decided amount banks pay less commision.

But that is different story and requires more reserch my side.

Btw i did talk to Local 2 wheeler showroom handler regarding this and he wanted hire a person who keep tracks of all this commision.

 

[VISHESH_BANSAL]

So here I'm not saying that you should not buy things on no cost EMI it's always complicated to do. You can forclose EMI. You can cancel EMI. You may consider return on investment. You can consider inflation.

But i was trying to point out a trick which in my immediate circle no one knew.


No you said merchant provide discount. So there is 2 type of discounts here

1.) Extra discount :- if you're getting it probably better but it's less likely. I feel it's like very good credit card which will get devalued one day.

2.) Interest discount:- this gets reimbursed from commision from bank or NBFC. Do you really think merchants will just happily give customers where bank can give 16% interest. They get commission from bank and this commision does not attract GST.


So seller POV:
1) selling at 110 without NCEMI
Sell for 110 and pay GST on 110

2) selling at 110 with NCEMI
Sell at ₹103 pay GST on ₹103 get commission of ₹7

Now actual commision rates differ because it's more of volume like more people lesser commision(here argument from bank is our EMIs are encouraging to spend more) so if more people than pre decided amount banks pay less commision.

But that is different story and requires more reserch my side.

Btw i did talk to Local 2 wheeler showroom handler regarding this and he wanted hire a person who keep tracks of all this commision.

Whatever would be the case.
Merchant is not getting any additional benifit by giving Interest discount as an Instant discount except Increase in sales and hence Increase in profits

NCEMI is funded by Brands to boost the sale.
Merchant gives the Instant discount and receive the same from Brands

Only In giving Bank specific discount Bank and Merchant is involved and there is commision involved.

Whatever Maths you did in your previous comments, do the same maths in following case.

Product Price is XXX.
Under NCEMI offer Interest of YYY is given as CashBack after 90 days not as an Upfront discount.
This happens in Offline Shopping.

 

[shivek]

I can't say for others but for me whenever I buy from Samsung I use NC EMI and I always get invoice at pre-discounted price.
Attached invoice snippet for both products (referenced in calculations).

Extra discount: That is Samsung offer and is available for majority banks (core cards). Bank changes time to time.
Even without extra discount, my cumulative (product + Interest) GST out-go is still less. If GST on product is less than 22% then my GST out-go will be higher

 

[VISHESH_BANSAL]

I can't say for others but for me whenever I buy from Samsung I use NC EMI and I always get invoice at pre-discounted price.
Attached invoice snippet for both products (referenced in calculations).

Extra discount: That is Samsung offer and is available for majority banks (core cards). Bank changes time to time.
Even without extra discount, my cumulative (product + Interest) GST out-go is still less. If GST on product is less than 22% then my GST out-go will be higher

In your case Interest charged by Bank would be given as CashBack rather than Instant discount?