Taxability of Delay Interest on Goods Delivery under CGST Act Section 9 & HSN Code 999794

The interest charged for delay in delivery of goods is deemed taxable under Section 9 of the Central Goods and Services Tax Act, 2017, and falls under HSN Code 999794. The ruling establishes that the applicant's situation aligns with the description of the service under this HSN code, confirming the taxability of the interest charged for delay in delivery of goods.

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Issues:
1. Whether interest charged for delay in delivery of goods is taxable under Section 9 of CGST Act, 2017 or HGST Act, 2017 or exempt under Section 11 of CGST Act, 2017 or HGST Act, 2017.
2. What is the HSN Code of the service mentioned in the first issueRs.

Analysis:

Issue 1:
The applicant, acting as a procurement agency for the Government of Haryana and Government of India, purchases paddy from arthias and gets it milled from rice millers. The contract with rice millers includes a provision for charging interest for delay in delivery of milled rice. The applicant contends that this interest, known as holding charges, is a taxable supply under HSN 999794. The applicant relies on the Indian Contract Act, 1872, specifically Sections 73 and 74 dealing with liquidated damages. The applicant argues that tolerating the act of delay in delivery constitutes a taxable supply under Para 5 (e) of Schedule II of the Central Goods and Services Act, 2017. The applicant meets the conditions for classifying the supply under HSN 999794, including the presence of an agreement, benefit and obligation, and toleration of the act.

Issue 2:
To determine the taxability of the interest charged for delay in delivery of goods, the relevant sections of the CGST Act, 2017 are examined. Section 9 of the CGST Act, 2017 pertains to the levy and collection of tax on intra-State supplies of goods or services. Section 11 provides for the power to grant exemptions from tax based on public interest. The HSN Code 999794 describes the service of agreeing to tolerate an act, which aligns with the applicant's situation. The ruling confirms that the interest charged for delay in delivery of goods is taxable under Section 9 of the CGST Act, 2017 and classifies the service under HSN 999794.

This comprehensive analysis of the judgment addresses the issues raised and provides a detailed understanding of the legal reasoning and implications involved in the ruling.

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