“No-cost EMI” is not free. You pay GST on the interest you were told you would not pay.

How the no-cost trick works

RBI does not permit banks to lend at 0%. So “no-cost EMI” is not a 0% loan — it is a normal interest-bearing loan with the interest handed back to you as an upfront discount. The accounting is real, and so is the tax on it:

1. The bank converts your purchase to EMI at its normal rate — say 16%.
2. It calculates the interest, and the merchant or bank discounts that same amount off the price.
3. GST at 18% is charged on the interest — because interest on a card EMI is a supply of services. The discount does not remove the GST.
4. A processing fee is usually charged anyway, plus GST on it.

So on a ₹60,000 purchase at 16% over 6 months with a ₹199 fee: the “waived” interest is about ₹2,831, the GST on it is about ₹510, and the fee plus its GST is about ₹235. You pay roughly ₹744 for something advertised as free — an effective rate of about 4.2%, not 0%.

When it is still worth it

Often! An effective 4% on money you were going to spend anyway is cheap credit — far cheaper than revolving a card at 36–42%. The point is not that no-cost EMI is a scam. It is that it is not free, and you should compare it against your actual alternative rather than against zero.

Things to check before converting

• Is the discount actually applied? On some offers the “discount” is simply the price marked up first. Compare the cash price on another site.
• Foreclosure charges. Card EMI usually carries a fee to close early, plus GST.
• Your credit limit is blocked for the full purchase amount, not the EMI.
• Missing an EMI can void the no-cost arrangement and reinstate the full interest.

GST on card EMI interest and fees is charged at the standard 18% rate for financial services. The rate is an input above — confirm the rate and the fee on your own offer document, since both vary by issuer and by offer. This is arithmetic, not tax advice.