Credit card EMI: You must be aware of what is the consequence of not paying the credit card outstanding amount on the due date. In fact, in such a situation, huge interest may have to be paid.
Credit card EMIWhen ‘No Cost EMI’ is offered instead of full payment, people think that ‘No Cost EMI’ means that they have to pay only that much amount for the purchase . Apart from this, there will be no extra charge. But this does not happen. Often ‘No Cost EMI’ also has a cost. If you are not aware of this facility when you decide to avail it, then paying the credit card EMI can lead to heart palpitations. You must be aware of what is the consequence of not paying the credit card dues on due date. In fact, in such a situation, huge interest may have to be paid. This interest can be up to 42 percent per annum. But do you know that apart from the interest mentioned in the credit card EMI, there is also an extra cost of 18% attached to it! Let us understand why this happens…
GST is levied on credit card interest
Talking about GST on normal credit card EMIs, you may have to pay Goods and Services Tax (GST) on the interest charged on the credit card outstanding amount. Not only this, there is GST on most of the services of financial institutions. Interest charged on credit cards also falls in this category, on which 18 percent GST has to be paid. This GST is levied on interest on credit card transactions. If 20 percent interest is paid on EMI, then if 18 percent GST is added on it, the total interest will be 23.6 percent.
How to GST on ‘No Cost EMI’ also?
Now let us understand the EMI ‘No Cost’ option. Actually, in case of no-cost EMI, the credit card issuing bank charges interest, but the retailer selling the goods offers you an amount equal to the interest charged during the entire tenure of the EMI as an instant discount. This is why it claims that this EMI is at no cost to you. But the discount usually includes only the EMI interest and not the GST charged on that interest. For example, if the annual interest on credit card EMI is 20 percent, then you will have to pay 18 percent GST on that too, which will be equal to 3.6 percent of the total EMI amount. Apart from this, you may also have to pay some more money in the form of processing fee or any other charge.
