TMI BlogClarification regarding applicability of GST on additional / penal interest.X X X X Extracts X X X X X X X X Extracts X X X X ..... a lender at a specified date every calendar month. EMIs are used to pay off both interest and principal every month, so that over a specified period, the loan is fully paid off along with interest. In cases where the EMI is not paid at the scheduled time, there is a levy of additional / penal interest on account of delay in payment of EMI. 2. Doubts have been raised regarding the applicability of GST on additional / penal interest on the overdue loan i.e. whether it would be exempt from GST in terms of Sl. No. 27 of notification No. 12/2017-State Tax (Rate) [FTX.56/2017/25 dated 29th June 2017] or such penal interest would be treated as consideration for liquidated damages [amounting to a separate taxable supply of services under ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... to avail a loan at interest of 2.5% per month for purchasing the mobile from M/S ABC Ltd. The terms of the loan from M/S ABC Ltd. allows Y a period of four months to repay the loan and an additional / penal interest @ 1.25% per month for any delay in payment. 4. As per the provisions of sub-clause (d) of sub-section (2) of section 15 of the Assam GST Act, the value of supply shall include interest or late fee or penalty for delayed payment of any consideration for any supply . Further in terms of Sl. No. 27 of notification No. 12/2017-State Tax (Rate) [FTX.56/2017/25 dated 29th June 2017] services by way of (a) extending deposits, loans or advances in so far as the consideration is represented by way of interest or discount ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... otification No. 12/2017-State Tax (Rate) [FTX.56/2017/25 dated 29th June 2017]. The value of supply of mobile by X to Y would be ₹ 40,000/- for the purpose of levy of GST. 6. It is further clarified that the transaction of levy of additional / penal interest does not fall within the ambit of entry 5(e) of Schedule II of the Assam GST Act i.e. agreeing to the obligation to refrain from an act, or to tolerate an act or a situation, or to do an act , as this levy of additional / penal interest satisfies the definition of interest as contained in notification No. 12/2017-State Tax (Rate) [FTX.56/2017/25 dated 29th June 2017]. It is further clarified that any service fee/charge or any other charges that are levied by M/S ABC ..... X X X X Extracts X X X X X X X X Extracts X X X X
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