9911796707
TMI Blog2019 (9) TMI 693X X X X Extracts X X X X X X X X Extracts X X X X ..... ence to such a similar provision under the CGST or MP GST Act would be mentioned as being under the GST Act. 3. BRIEF FACTS OF THE CASE: Applicant is a registered stock broker dealing in purchase/sale of securities for and on behalf of its clients and charges brokerage for its activities. 4. QUESTIONS RAISED BEFORE THE AUTHORITHY:- The following questions have been posted before the Authority in the application Applicant charges interest from customers for delayed payment. The amount on which interest is charged consists of two components - cost of securities and brokerage. Interest charged on cost of securities is exempt under notification no. 12/2017 Central Tax(Rate) dated 28-06-2017 as amended. Then what will be the tax liability on such interest charged from customers? 5. RECORD OF PERSONAL HEARING: 5.1. Shree Sunil P Jain, CA of the applicant for personal hearing the submissions already made in the application. The Applicant states that - 5.2. Indo Thai Securities Limited is a public limited company. It is NSE/BSE Broker. It acquires/sells securities to and on behalf of clients and charges brokerage for its activities. Securities are neither goods nor services under G ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... on issued under the provision of this act. 3. Determination of the liability to pay tax on goods or services or both. 1. Classification The question is regarding the Classification of additional amount termed as interest is being charged on the delayed payment from customers. Sec 15 (2) The value of supply shall include- (d)- interest or late fee or penalty for delayed payment of any consideration for any supply; It is clear from the simple reading of 15(2)(d) that the interest, late fee or penalty charged from customer shall be added to the transaction value and hence shall be taxable at the rate at which such goods/ services are taxable or in other words the classification of interest, late fee or penalty cannot be different from the classification of goods or services. Here in the given case applicant is stock broker engaged in the activity of purchase and sales of securities for & on behalf of it's customers and the consideration is being charged in the form of brokerage as a fixed percentage of transaction value. Having regard to the trade parlance it is also clear that stock broker gives a reasonable time to its customer to make the payment however if the custom ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... roking Services. 2. Applicability of Notification No. 12/2017. Applicant's contention is, on the delay of payment, the additional amount is charged is interest in nature. To qualify the amount as interest, there must be some specific percentage to be charged on daily / monthly or some periodic basis. However as per information gathered from the industry the additional amount charged from the customer by the share brokers on delay of payment is not on specific percentage basis. Hence the amount charged cannot be qualified as interest. Here it is necessary to differentiate between the Interest, late fee and Penalty. Interest: interest is charged to compensate for late payment etc. Interest is charged to compensate for time value of money. Interest is charged at the specified percentage and cannot be fixed. Late Fee: Late fee is generally charges as fixed amount on a daily basis depending on the [period of delay. Penalty: Penalty is levied for something wrong you have done or what you should have done but could not do so. Penalty can be in absolute as well as in percentage terms. Hence the additional amount being charged on delayed payment is in the nature of penalty which ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... 39; means interest payable in any manner in respect of any moneys borrowed or debt incurred (including a deposit, claim or other similar right or obligation) but does not include any service fee or other charge in respect of the moneys borrowed or debt incurred or in respect of any credit facility which has not been utilised;". Accordingly, based on the above provisions, the applicability of GST in both cases listed in para 3 above would be as follows: Case 1: As per the provisions of sub-clause (d) of sub-section (2) of section 15 of the CGST Act, the amount of penal interest is to be included in the value of supply transaction between X and Y is for supply of taxable goods i.e. mobile phone. Accordingly, the penal interest would be taxable as it would be included in the value of the mobile, irrespective of the manner of invoicing. 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 SI. No. 27 of notification No. 12/2017- Central Tax (Rate) dated 28.06.2017. Accordingly, in this case the 'penal interest' charged thereon on a transaction between Y and M/s ABC Ltd. would not be subject to ..... X X X X Extracts X X X X X X X X Extracts X X X X
|
