No Cost EMI Explained: Processing Fee, GST on Interest and the Discount You May Lose
Riya bought a ₹30,000 phone last Diwali on a six-month no cost EMI. She expected six bills of ₹5,000 each. Her first credit card statement showed ₹5,000, plus a processing fee, plus GST on that fee, plus a smaller GST line she couldn’t place. None of it was large. All of it surprised her, because the checkout page had said “No Cost”.
That is how no cost EMI works for most buyers. The bank still charges interest; the seller or brand gives you a discount equal to that interest, so your instalments add up to the listed price. The extras come from three places: a bank processing fee, 18% GST on the interest part of each instalment, and sometimes a bank discount you give up by choosing EMI. This guide explains each one with numbers, using Amazon’s published bank fees, HDFC Bank’s EMI terms and the Reserve Bank of India’s rules.
How does no cost EMI actually work?
Amazon’s EMI terms and conditions spell it out. The no cost EMI facility “is funded by participating sellers and brands”, who “provide amounts equivalent to the interest imposed by the banks”. You pay instalments that total the product’s list price. HDFC Bank’s EasyEMI page says the same thing from the bank’s side: the merchant gives a discount or cashback “to the tune of interest charged by the bank”, and the “Bank continues to charge interest as applicable.”
So a no cost EMI is an interest-bearing loan with a matching discount attached. The discount is real money, and so is the loan, with the usual fees and taxes on top.
What RBI has said about zero-interest EMIs
The Reserve Bank looked at this in its circular of 17 September 2013 on practices that hurt customer protection. It found that in zero percent EMI schemes on credit cards, “the interest element is often camouflaged and passed on to customer in the form of processing fee”, and said “the very concept of zero percent interest is non-existent”. The same circular said that a price discount from a dealer or manufacturer should reduce the loan amount, without tampering with the interest rate.
The current rule is in RBI’s Master Direction on credit and debit cards (2022, updated March 2024). Paragraph 6(b)(iii) requires card issuers to show “the principal, interest and upfront discount provided by the merchant/card-issuer (to make it no cost)” before converting a purchase to EMI, and to show them separately on the card statement. It adds that an EMI with an interest component “shall not be camouflaged as zero-interest/no-cost EMI”. This is why the checkout page and your statement both list interest even on no cost plans.
A no cost EMI example with every rupee shown
Here is Riya’s phone in numbers. Assume a ₹30,000 phone, six months, and a card EMI rate of 16% a year. Your bank’s actual rate is shown on the payment page. The interest over six months on the discounted amount is about ₹1,352, so the platform knocks ₹1,352 off and the bank lends ₹28,648. At 16%, that loan has an EMI of exactly ₹5,000.
| Item | HDFC Bank credit card | SBI credit card |
|---|---|---|
| Listed price | ₹30,000 | ₹30,000 |
| No cost EMI discount (equal to interest) | −₹1,352 | −₹1,352 |
| Six instalments of ₹5,000 | ₹30,000 | ₹30,000 |
| GST at 18% on ₹1,352 of interest | ₹243 | ₹243 |
| Processing fee on Amazon | ₹299 + GST = ₹353 | ₹45 + GST = ₹53 |
| What you actually pay | ₹30,596 | ₹30,296 |
The processing fees are the amounts Amazon lists for HDFC Bank credit cards and for six-month SBI credit card EMIs on purchases of ₹20,000 or more. On the HDFC card, “no cost” adds about 2% to the price. On the SBI card it adds about 1%. Stretch the same phone to 12 months and the interest discount rises to about ₹2,446, so GST on interest climbs to about ₹440.
Processing fee by bank on Amazon
Amazon itself charges no fee for EMI; its terms say so. The bank’s processing fee is added to your first instalment. These are the fees listed in Amazon’s EMI terms as of 3 October 2026:
| Card | Processing fee per EMI or no cost EMI transaction |
|---|---|
| HDFC Bank credit and debit cards | ₹299 + GST |
| ICICI Bank credit cards | ₹299 + GST |
| ICICI Bank debit cards | ₹99 + GST |
| Axis Bank credit and debit cards | ₹299 + GST below ₹50,000; ₹599 + GST from ₹50,000 |
| Kotak Mahindra Bank | Credit card ₹249 + GST; debit card ₹199 + GST |
| IDFC FIRST Bank credit cards | ₹249 + GST |
| SBI credit cards (purchases of ₹20,000 or more) | ₹45 (6 months), ₹69 (9), ₹89 (12), ₹129 (18), ₹169 (24 months), plus taxes |
| RBL Bank credit cards | 1.5% of the amount or ₹150, whichever is higher, plus GST |
| Federal Bank credit cards | 1% of the amount or ₹99, whichever is higher, plus GST |
Fees on other sites and in shops can be higher or lower. HDFC Bank’s EasyEMI page gives a range of ₹99 to ₹699 plus GST depending on product and merchant, and says the fee “does not get reversed even in case of cancellation / pre-closure.”
GST on interest: the line most people miss
HDFC Bank’s terms put it plainly: “GST of 18% is applicable. GST will be applicable on the Interest Component of EMI.” Amazon’s terms also say banks may charge GST on EMI purchases “over and above the product price”. The discount from the seller covers the interest. It does not cover the tax on the interest, which the bank bills you every month along with the instalment.
On a ₹30,000 purchase over six months, that is a few hundred rupees. On a ₹1.2 lakh laptop over 12 months at 16%, the interest discount is close to ₹9,800, and GST on it is about ₹1,760. Worth knowing before the statement arrives.
The discount you might give up
This is often the biggest hidden cost of a no cost EMI, and it does not show up as a charge at all. During festive sales, a product may carry a bank instant discount for full payment, a different discount for EMI, and a no cost EMI option. They do not always stack. Amazon’s terms also say the no cost discount “will be calculated only on the eligible items in the cart”, so a mixed cart can get less than you expect.
Run the comparison on the payment page itself. Note the final amount for paying in full with the best card offer, then the total of all instalments plus processing fee and GST under the EMI option. If paying in full with a 10% bank discount saves ₹3,000 and the EMI route saves you only ₹1,352 of interest, the EMI route costs you about ₹1,650 more, before fees. During sales, banks sometimes set a higher discount cap for credit card EMI than for full payment, so the comparison can swing either way. In our Amazon Great Indian Festival 2026 guide we show how SBI’s caps differed between EMI and full payment in July.
Returns, cancellations and pre-closure
Returning a product bought on EMI is where the costs stick. HDFC Bank’s terms say that if a merchant refund covers more than 90.01% of the EMI principal outstanding, the loan is pre-closed: interest already billed is not reversed, and pro-rata interest up to the closure date is charged. The processing fee stays. Kotak’s terms on Amazon allow foreclosure charges of up to 2% of the principal outstanding plus 18% GST on merchant EMI.
Amazon’s terms advise customers to ask their bank how a cancellation or return will affect the EMI and any pre-closure or interest charges. The Flipkart Axis Bank card’s terms ask customers to cancel the EMI with the bank by phone before the first instalment is debited when an EMI order is cancelled on the merchant site.
Does no cost EMI affect your credit score?
Indirectly, yes. Amazon’s FAQ gives the example of an ₹18,000 purchase on a nine-month no cost EMI: the bank first blocks ₹18,000 of your credit limit, then you repay ₹2,000 a month. That blocked amount counts as used credit, so a big EMI purchase can push your credit utilisation up for months. A high utilisation ratio can pull your score down even if you never miss a payment.
The instalment is also part of your minimum amount due. HDFC’s terms say the EMI debit on each statement is included in the minimum due and must be paid by the due date. Miss it and you have a late payment on your record, with late fees and interest on top. If you are planning a home loan or personal loan in the next few months, check your CIBIL score before adding more EMIs.
Debit card EMI works differently. Amazon says your bank deducts the monthly amount from your account through a pre-approved overdraft, so you do not need the full amount in your account. It is still a loan from your bank.
When no cost EMI is worth using
| Usually fine | Usually a poor deal |
|---|---|
| You were going to buy the item anyway, at this price | The EMI price is higher than the best full-payment price with a bank discount |
| The processing fee is small relative to the price (for example SBI’s ₹45 on six months) | A ₹299 fee on a ₹5,000 item, which adds 7% to the price |
| Your credit limit has room after the purchase | The blocked amount pushes your card close to its limit |
| You pay every bill in full | You carry a balance, so card interest of around 3.75% a month applies to anything unpaid |
Carrying a balance is the most expensive mistake. Our explainer on how credit card interest is calculated shows how quickly it builds up. We compared the Flipkart and Amazon card offers for this season in Big Billion Days 2026 bank offers vs Amazon’s SBI deal.
FAQ: no cost EMI
Is no cost EMI really interest-free?
No. The bank charges interest and the seller gives an equal discount, so the instalments match the listed price. GST on the interest and the processing fee are extra.
How much extra will I pay on a no cost EMI?
Depends on the bank and tenure. On a ₹30,000, six-month purchase at 16%, it is roughly ₹300 with an SBI card and ₹600 with an HDFC card on Amazon, from GST and the processing fee.
Is the processing fee refunded if I return the product?
Usually not. HDFC Bank says its fee is not reversed on cancellation or pre-closure.
Can I choose no cost EMI on a debit card?
Yes, with some banks. Amazon lists HDFC, SBI, Axis, ICICI, Federal and Kotak Mahindra debit cards for EMI. Minimum purchase amounts vary by bank, going up to ₹8,000 for SBI debit cards.
Will the bank show the interest on my statement?
It should. RBI’s card rules require the principal, interest and merchant discount to be shown before conversion and listed separately on the statement.
Disclaimer: Fees and terms are as published by Amazon, HDFC Bank and RBI on 3 October 2026 and can change; the examples are illustrations at an assumed 16% rate, and your bank’s EMI schedule is the final word.
