GST on co - operative housing society, Goods and Services Tax - GST

[Kaustubh Karandikar]

1. What is the Applicability of GST on the penal interest charged by a cooperative housing society from its defaulting members.

2. What is the Applicability of GST in case the monthly maintenance amount exceeds Rs.7500/- due to penal interest in case of default.

Posts / Replies

[Padmanathan Kollengode]

Can you pls explain the exact nature of penal interest? what is the penal interest collected for?

Also, pls consider Section 15 (2) (d) which reads as:

(2) The value of supply shall include–––

(d) interest or late fee or penalty for delayed payment of any consideration for any supply; and

Therefore, if it is delayed payment of any consideration, it will form part of value of supply.

[KASTURI SETHI]

Penalty in the form of interest. Higher rate of interest is ordered by the Courts. Recently High Court imposed penal interest on the department for inordinate delay in sanction of refund or denial of refund on technical ground (in violation of principles of natural justice).

[Shilpi Jain]

Interest to be added to value of supply if it is for delay in payment of consideration.

The liability of interest will be the same as applicable to the supply to which it is added

[Amit Agrawal]

1. What is the Applicability of GST on the penal interest charged by a cooperative housing society from its defaulting members.

Answer: Its taxable and same is NOT covered under exemption entry No. 77 (c) of Notification No. 12/2017- Central Tax (Rate) as amended till date. So, if subject Co. operative society is registered under GST or required to be registered under GST (due to aggregate turnover exceeding prescribed limit, liability to pay GST under RCM etc.), GST is payable against such penal interest.

2. What is the Applicability of GST in case the monthly maintenance amount exceeds Rs.7500/- due to penal interest in case of default.

Answer: As explained above, applicability of GST against 'penal interest' has nothing to do with exemption entry No. 77 (c) of Notification No. 12/2017- Central Tax (Rate) as amended till date. So, GST is payable (i.e. if subject Co. operative society is registered under GST or required to be registered under GST) on 'penal interest' even when 'monthly contribution + penal interest thereon' does not exceed Rs. 7,500/-.

These are ex facie views of mine and the same should not be construed as professional advice / suggestion.

[Amit Agrawal]

For above post of mine, I have presumed 'penal interest' - from the query - as the one which falls under 'Value of supply' as per Section 15 (2) (d) of the CGST Act, 2017.

[Kaustubh Karandikar]

Thanks Amit ji and other experts for your valuable advice.