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 ..... i. Kullu, Chamba, Kangra, Revenue Distt Nurpur and Una, H.P 4. The Asstt. Commissioner of State Taxes and Excise, Incharge Distt. Kinnour, H.P Dated Shimla-9 2nd Aug., 2019. Madam/Sir, Subject: Clarification regarding applicability of GST on additional / penal interest. Various doubts have been raised regarding applicability of GST on delayed payment charges in case of late payment of Equated Monthly Instalments (EMI). An EMI is a fixed amount paid by a borrower to 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 ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ; 500/- per month for the delay. In some instances, X is charging Y ₹ 40,000/- for the mobile and is separately issuing another invoice for providing the services of extending loans to Y, the consideration for which is the interest of 2.5% per month and an additional / penal interest amounting to ₹ 500/-per month for each delay in payment. Case 2: X sells a mobile phone to Y. The cost of mobile phone is ₹ 40,000/-. Y has the option 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 ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... voicing. Case 2: The additional / penal interest is charged for a transaction between Y and M/s ABC Ltd., and the same is getting covered under Sl. No. 27 of notification No. 12/2017-State Tax (Rate) dated 30.06.2017. Accordingly, in this case the 'penal interest' charged thereon on a transaction between Y and M/s ABC Ltd. would not be subject to GST, as the same would not be covered under notification No. 12/2017-State Tax (Rate) dated 30.06.2017. 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 HPGST Act, i.e. ..... X X X X Extracts X X X X X X X X Extracts X X X X
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