Interest, late fees, penalties post-GST for delayed payments pre-GST now subject to GST under Sections 13 & 7

The Authority ruled that interest, late fees, and penalties received post-GST implementation for lease/rent services due to delayed payments pre-GST are liable to GST. The time of supply for these additional services falls after 01.07.2017, making them subject to GST under Sections 13 and 7 of the CGST and TNGST Acts.

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Issues:
1. Whether interest, late fee penalty received for services rendered before GST regime are liable to GSTRs.

Analysis:

Issue 1:
The Applicant sought an Advance Ruling on the liability of GST on interest, late fee, and penalty received post-GST implementation for services rendered before 01.07.2017. The Applicant argued that such amounts are not subject to GST if related to services provided pre-GST regime. The State Jurisdictional Officer highlighted the need for clarity on the timing of levying late fees and penalties. The Authority analyzed the documents provided, including Rent Claim Advices (RCAs) showing penalties for belated payments pre-GST. The Authority considered the provisions of CGST and TNGST Acts, emphasizing the importance of the time of supply as per Section 13 for GST liability determination.

The Authority noted that the Applicant's services were provided pre-GST, involving lease rentals and penalties for delayed payments. The invoices were issued during the service tax regime, but penalties were received post-GST due to late payments. The Authority referenced the notification specifying the enforcement date of various GST Act sections. Section 13 of CGST and TNGST Acts determines the time of supply, with the Applicant's invoices issued pre-GST but payments received post-GST, making the time of supply pre-GST as per Section 13(2)(a).

Furthermore, the Authority examined Section 7 of CGST and TNGST Acts, defining supply to include various transactions like lease or disposal for consideration. The late fees and penalties collected post-GST for delayed payments were considered a separate supply of service under Section 7(1)(a). The Explanatory Notes on service classification supported this interpretation. As the consideration and invoices were post-GST, the time of supply for these additional services falls after 01.07.2017, making them subject to GST.

In conclusion, the Authority ruled that interest, late fees, and penalties received post-01.07.2017 for lease/rent services due to delayed payments pre-GST are indeed liable to GST.

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