Case Law Details
In re Ushabala Chits Private Limited (GST AAR Andhra Pradesh)
Whether the interest/penalty collected for delay in payment of monthly subscription by the members forms a supply under GST? If the said interest/penalty is a supply, what is the classification and rate of duty applicable on the said supply?
As per the provisions of sub-clause (d) of sub-section (2) of section 15 of the GST Act, the value of supply shall include “interest or late fee or penalty for delayed payment of any consideration for any supply”. Further in terms of SI. No. 27 of notification No. 12/2017- Central Tax (Rate) dated the 28.06.2017 “services by way of (a) extending deposits, loans or advances in so far as the consideration is represented by way of interest or discount (other than interest involved in credit card services)” is exempted.
In the instant case, having regard to the nature of transaction it cannot be said that the chit company has extended any deposit, loans or advances to its customers hence the additional amount being charged cannot be treated as interest hence the exemption granted under entry no 27 of notification no 12/2017 is not applicable on the transaction on which advance ruling is sought.
It is further clarified in circular No.102/21/2019-GST dated 28th June, 2019 that “any service fee/charge 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”
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