In Re M/s Shreenath Polyplast Pvt Ltd (AAR Gujarat)
We know that as per section 15(2)(4) of CGST ACT GST is applicable on interest or penalty levied by the seller on buyer on account of delay in payment of consideration of supply.
So if Mr X supplied goods worth Rs 10,000 (including GST @ 18%) to Mr Y on 01.01.2018 with the condition that Mr Y need to make payment by 31.01.2018 else interest will be applicable. In this case if Mr Y actually made payment of Rs 10,000 on 31.03.2018 and as a result of delay in payment Mr X levies interest of Rs 200 (say) then Mr X is required to pay GST @ 18% on such interest of Rs 200 as well.
It may be noted that above provision was not there in VAT as well as excise laws before 01.07.2017. So this is relatively new concept under GST.
However Notification No. 12/2017- Central Tax (Rate) dated 28.06.2017 in S.N 27 has specifically mentioned that any interest charged on account of extending deposit, loan or advances (other than interest on credit card services) would not attract GST.
In the given case of Advance Ruling, Delcredere agent (DCA) was extending loan to end customers and was collecting interest for extension of such loan and advances.
Billing to end customers was directly done by principal and role of DCA was limited to following:
1. finding customers for principal,
2. getting commission on supply from principal to end customer,
3. absorbing any bad debt arising out of such transaction,
4. granting loan and advances to end customers and
5. collecting interest from end customers on amount of loan amount.
Opinion was sought whether collection of interest by DCA from end customers will attract GST u/s 15(2)(4) of CGST ACT 2017.
It was decided that interest charged by DCA on amount of short term loans to end customers, is covered under Sl. No. 27 of the Notification No. 12/2017-Central Tax (Rate) dated 28.06.2017 and hence such interest amount will not attract GST.
Also Read AAAR Ruling- GST on interest on short term loan given by Del Credere Agent to buyers
