Appellate ruling: No GST on delayed electricity payment charges; GST applies to cheque dishonor fees

The appellate authority ruled that no GST is chargeable on delayed payment charges for electricity bills as the supply of electricity is exempt. However, GST is applicable on cheque dishonor fees collected from consumers as it constitutes a supply of service under Clause 5(e) of Schedule II to the CGST Act. The appeal was disposed of in accordance with these rulings.

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Issues Involved:
1. Condonation of delay in filing the appeal.
2. Taxability of delayed payment charges under Section 15(2) of the CGST Act, 2017.
3. Taxability of cheque dishonor fee collected by the appellants.

Condonation of Delay:
The appellants filed the appeal beyond the stipulated 30-day period, citing their lack of detailed understanding of the CGST Act provisions and the Chief Finance Officer's engagement in quarterly audits. The delay of 29 days was condoned by the authority, accepting the appeal for disposal.

Taxability of Delayed Payment Charges:
The appellants argued that delayed payment charges, collected for the delay in payment of electricity bills, should not be taxable under GST. They contended that these charges are akin to interest on the consideration for the supply of electricity, which is exempt from GST under Notification No. 2/2017-Central Tax (Rate) dated 28.6.2017. The AAR had previously ruled that such charges are includible in the value of supply under Section 15(2)(d) of the CGST Act and thus taxable.

Upon review, the appellate authority noted that the value of supply includes interest or late fees for delayed payment of any consideration. Since the supply of electricity is exempt from GST, the incremental value from delayed payment charges should also remain exempt. Therefore, the authority ruled that no GST is chargeable on the delayed payment charges.

Taxability of Cheque Dishonor Fee:
The appellants argued that the cheque dishonor fee is a penal charge and not a consideration for any supply, hence not liable to GST. The AAR had ruled that this fee is a consideration for 'tolerating an act,' thus taxable under Clause 5(e) of Schedule II to the CGST Act.

The appellate authority agreed with the AAR, stating that the fee collected for dishonored cheques is a supply of service under Clause 5(e) of Schedule II. This clause treats the act of tolerating a situation (like cheque dishonor) as a supply of service. Since this service is not exempt, GST is applicable on the cheque dishonor charges.

Ruling:
The appellate authority concluded that:
1. No GST is chargeable on the delayed payment charges collected for the delay in payment of electricity bills.
2. GST is chargeable on the cheque dishonor charges collected from consumers.

The appeal was disposed of accordingly.

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