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TMI Blog2020 (7) TMI 447X X X X Extracts X X X X X X X X Extracts X X X X ..... sion under the APGST Act. Further henceforth, for the purposes of this Advance Ruling, a reference to such a similar provision under the CGST or AP GST Act would be mentioned as being under the GST Act. 3. Brief Facts of the Case: The applicant is a company engaged in conducting chit auctions for the past 36 years and is one of the longest standing organisations. They register the members and conduct auction in respect of each chit each month. The member winning the auction will collect the prize money from the company. The company will be collecting subscriptions from members by dividing the prize money with number of members. The applicant is collecting the foreman commission @5% from the amount to be distributed to the member taking the prize money. The GST is paid on the foreman commission @12%. The foreman is responsible for registering the members, collection of money from the members, conduct of auctions and other related matters. The applicant is responsible to pay the prize money by due date to the winner of auction. Therefore, collection of amount from members is mandatory for payment of prize money to the winner by due date. However, many a time, the subscribers fail ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... escribers GST on the foreman commission and not on chit amount, being actionable claim. It is further submitted that interests on deposits is exempt from GST Act in terms of Sl.no.27 of the Notification No.11/2017-CT (Rate) dated 28-6-2017. B. The applicant submits that in terms of Section 15(2)(d) of the APGST Act, 2017, the value of supply includes interest or late payment or penalty for delayed payment of any consideration. Therefore, the interest, penalty or late fees are considered as part and parcel of the consideration towards the execution of activity. Accordingly, the interest/penalty collected for delay in payment of subscription charges would be treated as a part of subscription charges, which are not chargeable to GST. C. Further attention is invited to the Circular No.102/21/2019-GST dated 28-6-2019 issued by the CBIC, wherein it was clarified that in cases involving interest or penal interest on delayed payment of EMI are not leviable to GST as the said amount is treated as part of Actionable Claim and being interest on deposit extended in terms of Notifications No.12/2017-CT(Rate) supra. D. The consideration towards the foreman services is represented by 5% of pri ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ged on the delayed payment from customers. The GST Act 2017 mentioned the value of supply, vide Section 15 (2) "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, the applicant is chit company engaged in the activity of distribution of prize money to its members and the additional amount is being collected in the form of interest for delay payment from the members as consideration as a fixed percentage of transaction value. Having regard to the trade parlance it is also clear that chit company gives a reasonable time to its customer to make the payment however if the customer do not make the payment within the stipulated time then an additional amount is being charged and it may be termed as different names i.e. Interest, Late fee or Pen ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... oes 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' Further this matter has also been discussed in detail in the Circular No. 102/21/2019-GST issued on 28th June 2019, the relevant extracts are being produced here :- Generally, following two transaction options involving EMI are prevalent in the trade: - Case - 1: X sells a mobile phone to Y. The cost of mobile phone is Rs. 40,000/-. However, X gives Y an option to pay in instalments. Rs. 11,000/- every month before loth day of the following month, over next four months (Rs ii,000/- *4 = Rs. 44,000/-). Further, as per the contract, if there is any delay in payment by Y beyond the scheduled date, Y would be liable to pay additional / penal interest amounting to Rs. 500/- per month for the delay. In some instances, X is charging Y Rs. 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 Rs. 500/- per month for each delay in payment. Case - 2: X ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... harge or any other charges that are levied by M/s. ABC Ltd in respect of the transaction relating to extending deposits, loans or advances does not qualify to be interest as defined in notification 12/2017-Central Tax (Rate) dated 28th June, 2017, and accordingly will not be exempt" 7.3 The applicant further stated that vide Notification No.11/2017-CT (Rate) dated 28-6-2017, the law prescribes GST on the foreman commission and not on chit amount, being actionable claim as per Schedule III of GST Act, 2017. On examination of acts and rules prevailing it is opined that the chit amount is not a actionable claim and it defines under Section 3 of Transfer of Property Act, 1982 as " a claim of any debt, or to any beneficial interest in movable property other than the debt secured by mortgage of immovable property or by hypothecation or pledge of movable property, not in possession, either actual or constructive, of the claimant, which the Civil Courts recognize as affording grounds for relief, whether such debt or beneficial interest be existent, accruing, conditional or contingent." Here if we observe the difference between lottery ticket and railway ticket, a lottery ticket is action ..... X X X X Extracts X X X X X X X X Extracts X X X X
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