No Cost EMI from Amazon and Flipkart – How does it work?

swatkats

swatkats

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TLDR; There will be GST 18% on the Interest which was borne by the Flipkart or Amazon
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RBI prohibited financial institutes in offering ZERO percent interest loans. In such a situation, how one can offer No Cost EMI at ZERO interest, ZERO downpayment and ZERO processing fee?


Let us first understand the players involves in the online selling business.

# Buyers :It is you who browse online and place the order.

# Sellers : Sellers are not Amazon or Flipkart, but there are others who actually sell the products or brands by getting the orders on behalf of Amazon or Flipkart. You may find the seller details while buying the product or on the bill itself.

# Amazon or Flipkart: They are simply providing the connectivity between buyers and sellers and earning in between.

No Cost EMI from Amazon and Flipkart – How does it work?

Let me share what Amazon define this No Cost EMI as “No Cost EMI is an offer by which the total amount paid by you to the EMI provider will be the price of the product split equally across the EMI tenure. The interest payable to the bank will be offered as an upfront discount during checkout, effectively giving you the benefit of No Cost EMI.”.

Let us take an example to understand this concept in detail.

# Assume that you are buying a product which cost you Rs.30,000.

# Assume that there is an upfront No Cost EMI discount of Rs.638. This is equal to the interest your bank will charge you on 3 months EMI (which is based on the inputs of the credit card you are holding).

# Now the price of the product is reduced to Rs.29,362.

# However, your bank will charge you the interest on Rs.29,362 (but not on the price of the product which is Rs.30,000) as this is considered as the actual loan amount. Hence, for bank the credit is Rs.29,362+Interest of Rs.638 for 3 months=Rs.30,000.

# This Rs.30,000 will be converted to EMI of 3 months of Rs.10,000.

No-Cost-EMI-from-Amazon-and-Flipkart.jpg



Whether No Cost EMI is actually ZERO cost EMI?
You noticed in the above image (where I have highlighted the note) that Banks charge you taxes on such loans. Hence, this TAX is an additional cost to you which you have to bear on such purchases.

The applicable tax means the GST, which is 18% currently. Let us see how much it cost you in real after considering the tax.



Read more: https://www.basunivesh.com/2018/10/05/no-cost-emi-from-amazon-and-flipkart-how-does-it-work/
 
I think now the landscape is changing to move to a no cost financed option, and is resulting in the manufacturer is building into bundling the cost of the EMI into the product. If he sells at No Cost EMI - he gets his money, but if someone pays in full, he can pocket that extra monies. I am pretty sure this is true for mobiles phones of Vivo, Oppo and maybe OnePlus as well.

Need to research on this. If true, it makes no sense to buy in full, but only on credit.
 
vivek.krishnan said:
I think now the landscape is changing to move to a no cost financed option, and is resulting in the manufacturer is building into bundling the cost of the EMI into the product. If he sells at No Cost EMI - he gets his money, but if someone pays in full, he can pocket that extra monies. I am pretty sure this is true for mobiles phones of Vivo, Oppo and maybe OnePlus as well.

Need to research on this. If true, it makes no sense to buy in full, but only on credit.
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Yup, and moreover you can't exactly bargain with an online store like you could with a regular brick and mortar store. If the price online is lesser or same and finance is available then it makes it more attractive to the customer.
 
indy1811 said:
Yup, and moreover you can't exactly bargain with an online store like you could with a regular brick and mortar store. If the price online is lesser or same and finance is available then it makes it more attractive to the customer.
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The offline stores are bloody crooks as well. Once the item is out of their door and the payment is made, its service centre issue.
 
vivek.krishnan said:
The offline stores are bloody crooks as well. Once the item is out of their door and the payment is made, its service centre issue.
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Yeah, for mobiles they're insisting you to check for a DOA panel or some issue there only.

Once its out even for 5 mins, service centre is the way.
 
vivek.krishnan said:
I think now the landscape is changing to move to a no cost financed option, and is resulting in the manufacturer is building into bundling the cost of the EMI into the product. If he sells at No Cost EMI - he gets his money, but if someone pays in full, he can pocket that extra monies. I am pretty sure this is true for mobiles phones of Vivo, Oppo and maybe OnePlus as well.

Need to research on this. If true, it makes no sense to buy in full, but only on credit.
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This is definitely true. I remember when I was buying my TV 3-4 yrs ago that the guy told me that he won't be able to give me a discount if I was going to buy through Bajaj Finserv card but will give a 5k discount if bought in cash.
The order against 0% EMI also based their decision on this fact as they concluded that the cost has to be built into the cost of the product and hence people who don't opt for EMI are being duped.
 
Don't forget that even in the case where there really are no hidden details attached and the platform is absorbing the interest amount for the EMI, it is a small cost to pay for them towards boosting their sales KPI. These platforms do not get funding based on profitability. Profits are non existent. They get their funding based on different metrics centering around revenue, market mind share, brand perception indexes etc. So, making a margin may be in the interests of the vendor selling the product, but not in the immediate interests of the platform. Their goal is to make you spend money on the platform on things you may or may not need even it means they lose some money every time you buy. That is why you see No cost EMI or the more newer concept of giving 60K credit to buyers They want you to buy things now even if they make a loss on every sale and even if you can't pay them now. Every time complete the order process, they increase their chances for more funding.
 
I'm confused. Looking at that table in the link,
GST on 318 = 57.24, on 213 = 38.34, on 107 = 19.26
Total = 752.84 which is exactly that 638 rupees+18% GST. So it does not look like we got any 638 rupees as discount here. What am I missing?
 
6pack said:
I'm confused. Looking at that table in the link,
GST on 318 = 57.24, on 213 = 38.34, on 107 = 19.26
Total = 752.84 which is exactly that 638 rupees+18% GST. So it does not look like we got any 638 rupees as discount here. What am I missing?
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I don't get why you are confused.
They calculate the interest components of your EMI and give that as an advance discount, making your final price after paying the interest to the CC provider, the same as the price of the product. It's the 18% GST component on the interest that we are having to pay now, apart from the actual price of the product.
 
rdst_1 said:
This is definitely true. I remember when I was buying my TV 3-4 yrs ago that the guy told me that he won't be able to give me a discount if I was going to buy through Bajaj Finserv card but will give a 5k discount if bought in cash.
The order against 0% EMI also based their decision on this fact as they concluded that the cost has to be built into the cost of the product and hence people who don't opt for EMI are being duped.
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Exactly.
 
Lord Nemesis said:
Don't forget that even in the case where there really are no hidden details attached and the platform is absorbing the interest amount for the EMI, it is a small cost to pay for them towards boosting their sales KPI. These platforms do not get funding based on profitability. Profits are non existent. They get their funding based on different metrics centering around revenue, market mind share, brand perception indexes etc. So, making a margin may be in the interests of the vendor selling the product, but not in the immediate interests of the platform. Their goal is to make you spend money on the platform on things you may or may not need even it means they lose some money every time you buy. That is why you see No cost EMI or the more newer concept of giving 60K credit to buyers They want you to buy things now even if they make a loss on every sale and even if you can't pay them now. Every time complete the order process, they increase their chances for more funding.
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Again, treading ground here, but during sales like Amazon and FK sales, they are looking at gaining volumes and hoping to make it a black friday equivalent. Plus we do spend during this time.

As for giving credit, it's not like they are going to take a massive writeoff, they will just sell the defaulted loans at minimal loss to a collector. Which we know works out in whose favour. But yeah, true.
 
And in other news Amazon losses mount to 6000 crores. So most of us have been buying cos we get good discount. Now , once these discount stop would we continue buying .?
 
Discounts won't stop. Its a bottomless pit. Investors will keep investing and e-com platforms will keep discounts and everything else required to make people keep buying. Amazon has been at it for 24 years now. The only road block will be devious minds like Jaitley who wanted to tax amazon and flipkart on the money they are using to give discounts and inuring losses because he could not usually tax a company that is running with losses.
 
yes nowdays the its better to buy on emi than upfront as both cost same pretty much. I just bought 2 high ticket items on no cost emi on hdfc even though i could have bough em one time only.
 
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