prpri GST on interest, late fee or penalty for delayed payment GST on interest, late fee or penalty for delayed payment

Daily Dose of GST Update by CA Pradeep Jain

As per Section 12(6) of CGST Act, 2017 relating to Time of Supply of Goods states that time of supply to the extent it relates to an addition in the value of supply by way of interest, late fee or penalty for delayed payment of any consideration shall be the date on which the supplier receives such addition in value.

This means that the tax is payable on interest received for delayed payment. This was not payable in current excise regime but the same will be payable in proposed GST regime. But this provision of time of supply has made the things more worse. The tax on such interest etc. is payable on the date of receipt of payment. But how the treatment of the same will be done in returns is not known.

It will create problems which can be explained with the help of an example.

Situation: The assessee has sold goods for Rs. 10,000 vide invoice no. 25 dated 1.8.16 and charged GST in the invoice. As per terms, payment is to be made within 60 days but the payment was received on 31.12.16 i.e. after the stipulated time. Thus he has issued a debit note to the customer for amount of interest @12% for delayed payment in January 2018 for Rs. 300/-. But the payment of such interest was received by him in May 2018.

Issue: The question here arises that since the assessee has issued the debit note hence he will have to reflect the same in his GSTR-1 Return of January 2018 when such debit note was issued and as such his liability to pay tax will arise in month itself.

However, as per Section 12(6) the time of supply relating to debit note issued shall be date on which such amount is received by assessee, thus the supply falls in May 2018. Hence, the tax is payable in May 2018 only. But there is no mention of treatment in GSTR-1 return. The return will create liability in the month in which debit note is raised. Hence, there should be provision in return for the same.

Moreover, it is written in terms and conditions that the payment should be made within a particular time and interest will be charges afterwards. But as trade practice, nobody ask for the interest on delayed payment. However, when the GST is payable on such interest, the department will insist that debit note should be raised for delayed payment and GST should be paid.

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  1. Sivasankaran says:

    One of my client have issued GST Invoice for value Rs.10,000/- but the purchase party have not settled for last 24 months. Shall I raise GST Debit Note for Interest for late payment? Please guide me.




  3. Shravan Kumar B says:

    I have a leability of Rs. 15300 in CGST and SGST due to excess input credit avalable from filing TRAN 2 my CGST liability payable in cash is Zero, however SGST liability is Rs. 15,300/-

    Now when i make a interest payment of 18%, am i suppose to pay interest on 15,300 on SGST alone? or for CGST and CGST equally?

    Portal spilts the amount, whether this is valid? Is it a Lapse? what would be my liability|?

  4. O.P.Verma says:

    sir we have charged GST Amount July 2017 to Feb 2018. But we did not file any GST Return. what amt of penality& Interest paid if we want to deposit GST Amount 30 th April 2018 .What is 5000/ Maximum penality amt

  5. Shailesh Shah says:

    Whether Credit Card issuing Bank can charge GST on the amount of interest charged by the Bank on account of late payment by the Credit Card Holder ?

  6. ritesh gadia says:

    if bank is paying amount before LC date and charging interest on that , is this interest is chargeable and further the sales on which the bank paid early payment is pre-gst sales . kindly suggest at which rate the bank will charge the GSt or bank is liable to charge gst on pre-gst LC payment. and whom will issue the debit note to whom

  7. JJ says:

    In my view GST should not be charged on overdue interest, as this is neither Goods nor Service. This is just income and expense wherein TDS is deducted by the payer of and income tax is paid the receiver of the interest. Duplication of tax should be avoided by not charging GST on overdue interest.

  8. Manish J. Chauhan says:

    A public sector company ( Say company A)has issued a Work order for piping work to a contract company ( Say B). Stipulated date of completion was 20.11.2016. Contract Company (B) completed work on 31.03.2017. Invoice date is in Regime. Comapny A has levied penalty of Rs. 97000 for delayed work to company B Payment is being made in November-2017. Whether GST is applicable on this penalty? IF GST is applicable who will bear the cost of GST?. In this case company B is loosing 97000 Rs. from his profit.

  9. GIRISH says:

    On which rate I can discharge GST on interest received on delayed payment. If I have received interest on delayed payment I also need to pay the interest to supplier.

    Please let me know the SAC (service accounting code) & rate of interest on which GST is to be paid

  10. Rameshkumar says:

    Gst on delay payment
    We Purchases goods in april 17 and paid on date aug 17 we delay payment 90 days as per term condition of market .Party issue debit not to us without Gst charge .here reverse charge gst applicable please reply us we are very confuse this matter

  11. Ramesh Kumar rrr says:

    GST on Late payment we purchases goods before 30/06/2017 and payment on aug 17 we pay interest on late payment party raise debit not without GST charge .here applicble reverse charge GST please reply

  12. Ravi says:

    I m a restaurant owner .I am purchasing without paying tax on material from non registered dealers like vegetables chicken milk grocery etc for my daily I need to pay reverse charge for this purchase ?

  13. rahul sarraf says:

    i recieved credit card statement first late payment charge on same it was reversable late payment even gst is also charge but it was not reverse should i liable to pay gst or gst or not thank you

  14. V H SHAH says:

    Interest is not a sale. But a charge for payment accomdation. There should not be GST, since there was no Service Tax charged earlier.As you feel GST should be charged …..what should be the rate? This is also not defined……

  15. Nidhi says:

    I think you should refer negative List of Gst point n(Services by way of –
    (i) extending deposits, loans or advances in so far as the consideration is represented by way of interest or discount;)

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