In re Bajaj Finance Limited (GST AAR Maharashtra)
Whether the Bounce Charges collected by the Applicant should be treated as a supply under the GST regime?
In the present case, as per details presented before us, we clearly find that there is a clear understanding or agreement between the parties in the present case to foresee and tolerate an act or a situation of default on the part of the client for a monetary consideration which is actually a consideration received by the applicant, though in the agreement they may be giving this consideration, other names such as ‘penal charges’, penalty, Bounce Charges, etc, as thought proper by them, but these different nomenclatures in their Agreement would in no way change the actual nature of monetary “consideration” which would clearly be taxable for the supply of services as per Sr.No. 5(e) of Sch. II of the CGST Act, 2018.
To summarise, the exemption for financial transactions under GST laws is only in respect of the interest/discount earned or paid for loans, deposits or advances. If the transaction, as in the subject case deviates from the above, i.e. the consideration not being an interest or discount, the exemption is not available.
In the subject case the amount of bounce charges cannot be said to be penalty imposed on by the applicant. It is recovered/imposed only because the client has dishonoured the cheques issued by them towards payment of EMI. Dishonour of cheques i.e. a mode of repayment to the applicant by their customers, is an act which results in delay of receipt of repayments to the applicant.
This delay is an act done by their customers which is tolerated by the applicant because inspite of such dishonour the applicant proposes to continue the agreement with the defaulting party. Thus we find that the recovery of bounce charges is made in view of toleration of the act of the client by the applicant and therefore construes as ‘supply’ as per as per Sr. No. 5(e) of Sch. II of the CGST Act and is therefore taxable under the GST Act.
FULL TEXT OF ORDER OF AUTHORITY OF ADVANCE RULING MAHARASTRA
PROCEEDINGS
(under section 98 of the Central Goods and Services Tax Act, 2017 and the Maharashtra Goods and
Services Tax Act, 2017)
The present application has been filed under section 97 of the Central Goods and Services Tax Act, 2017 and the Maharashtra Goods and Services Tax Act, 2017 [hereinafter referred to as “the CGST Act and MGST Act”l by Bajaj Finance Limited, the applicant, seeking an advance ruling in respect of the following question:
Whether the Bounce Charges collected by the Applicant should be treated as a supply under the GST regime?
At the outset, we would like to make it clear that the provisions of both the CGST Act and the MGST Act are the same except for certain provisions. Therefore, unless a mention is specifically made to such dissimilar provisions, a reference to the CGST Act would also mean a reference to the same provision under the MGST Act. Further to the earlier, henceforth for the purposes of this Advance Ruling, a reference to such a similar provision under the CGST Act / MGST Act would be mentioned as being under the “GST. Act”.
02. FACTS AND CONTENTION – AS PER THE APPLICANT
