9911796707
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 ..... er 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) dated June 2017 or such penal interest would be treated as consideration for liquidated damages [amounting to a separate taxable supply of services under GST covered under entry 5(e) of Schedule II of the Gujarat Goods and Services Tax Act, 2017 (hereinafter referred to as the GGST Act) i.e. "agreeing to the ob ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... 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 GGST 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) dated the 30.06.2017 "services by way of (a) extending deposits, loans or advances in so far as the consideration is represented by way of interest or discount (other than interest involved in credit card service)" is exempted. Further, as per clause 2 (zk) of the notification No. 1272017-State Tax (Rate) dated the June, 2017, " 'interest' means interest payable in any manner ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... Schedule II of the GGST 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) dated 30.06.2017. It is further clarified that any service fee/charge or any other charges that are levied by M/s. ABC Ltd. in respect of the transaction related to extending deposits, loans or advances does not qualify to be interest as defined in notification No. 12/2017 State Tax (Rate) dated the 30th June, 2017, and accordingly will not be exempt. 7. Difficulty, if any, in the implementation of this circular may be brought to the notice of the Chief Commissi ..... X X X X Extracts X X X X X X X X Extracts X X X X
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