In re Pink City Steel Rolling Mills Pvt Ltd (GST AAR Rajasthan)
In a recent ruling by the Advance Ruling Authority in the case of M/S Pink City Steel Rolling Mills Pvt Ltd., the issue of GST applicability on delayed payment of interest was addressed. The applicant, a registered taxpayer under the Goods and Services Tax (GST) regime, had raised three significant questions related to the timing and procedure of GST payment on interest for delayed payment of consideration.
1. When is GST to be Paid on Delayed Payment of Interest?
The first question revolved around the stage at which GST is to be paid on delayed payment of interest by the purchaser of goods. According to Section 12(6) of the GST Act, the liability to pay tax arises on the date when the supplier of goods receives the additional value through interest on delayed payment of any consideration. This implies that GST is to be paid at the time when the supplier actually receives the interest amount.
2. Issuance of Fresh Invoice for Delayed Payment Interest:
The second query raised concerns whether, at the time of demanding interest or debiting interest in the purchaser’s account, a fresh invoice for delayed payment interest should be issued, even if the interest amount has not been received. The ruling clarified that in accordance with Section 12(6) of the GST Act, GST is to be paid when the supplier receives the addition in value through interest. It was further stated that a debit note may be issued under Section 34 of the Act for the interest on delayed payment.
3. GST Payable on Accrual Basis:
The third question sought clarification on whether GST is payable on an accrual basis. The ruling emphasized that GST on interest recovered is to be paid on the date when the supplier of goods receives the additional value due to delayed payment of any consideration. This implies that GST is not payable at the time of accrual of interest but when the interest is actually received by the supplier.
Key Takeaways:
