Liability for GST on Interest & Stamp Tax Reimbursement

The applicant is liable to pay GST on a reverse charge basis for the interest on late payment of invoices for imported goods, with the rate matching the IGST rate applicable to the goods. Additionally, the reimbursement of Stamp tax paid by the holding company does not qualify for exclusion under the pure agent rule, thus forming part of the consideration for the supply of goods and being subject to GST on a reverse charge basis.

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Issues Involved:
1. Liability to pay GST on reverse charge for interest on late payment of invoices for imported goods.
2. Liability to pay GST on reverse charge for reimbursement of Stamp tax paid as a pure agent by the supplier.

Detailed Analysis:

Issue 1: GST on Reverse Charge for Interest on Late Payment of Invoices for Imported Goods

Facts and Submission:
The applicant imports goods from its holding company in Turkey, with a payment term of 120 days from the invoice date. If payment is delayed, the holding company charges interest. The applicant sought clarification on whether GST on a reverse charge basis applies to the interest paid on such late payments and, if so, at what rate.

Legal Provisions:
- Section 7 of the CGST Act, 2017: Defines "supply" to include all forms of supply of goods or services.
- Schedule II of the CGST Act, 2017: Specifies activities to be treated as supply of goods or services, including "agreeing to the obligation to tolerate an act or a situation" under Entry No. 5(e).
- Section 15 of the CGST Act, 2017: Covers the valuation of supply, including interest for delayed payment as part of the value of supply.

Findings:
The interest paid for delayed payment of invoices is considered a supply of services under Entry No. 5(e) of Schedule II. As per Section 15(2)(d), the value of supply includes interest for delayed payment, making it liable to GST. The rate of GST will be the same as the IGST rate applicable to the imported goods.

Conclusion:
The applicant is liable to pay GST on a reverse charge basis for the interest on late payment of invoices for imported goods. The rate of GST will match the IGST rate applicable to the imported goods.

Issue 2: GST on Reverse Charge for Reimbursement of Stamp Tax Paid as a Pure Agent

Facts and Submission:
The applicant obtained a bank credit facility from CITI Bank based on a Corporate Guarantee issued by its holding company in Turkey, which paid Stamp tax in Turkey and raised a reimbursement invoice to the applicant. The applicant sought clarification on whether GST on a reverse charge basis applies to this reimbursement, arguing it should be considered as payment made to a pure agent.

Legal Provisions:
- Rule 33 of the CGST Rules, 2017: Defines conditions under which costs incurred by a pure agent are excluded from the value of supply.
- Section 2(31) of the CGST Act, 2017: Defines "consideration" to include payments made in respect of the supply of goods or services.
- Section 15 of the CGST Act, 2017: Covers the valuation of supply, including reimbursements.

Findings:
The supplier must satisfy all conditions under Rule 33 to qualify as a pure agent. The conditions include:
- Acting as a pure agent on authorization by the recipient.
- Separately indicating the payment in the invoice.
- Procuring supplies in addition to the services supplied on their own account.

The applicant failed to provide sufficient documentary evidence to prove that the supplier met these conditions. Specifically:
- No authorization document was provided.
- The reimbursement was not indicated separately in the supply invoice.
- The bank guarantee was directly related to the supply of goods, not an additional service.

Conclusion:
The supplier does not qualify as a pure agent under Rule 33. Therefore, the reimbursement of Stamp tax forms part of the consideration for the supply of goods and is liable to GST on a reverse charge basis.

Ruling:

1. Interest on Late Payment of Invoices:
- Liability: Yes, liable to pay GST on a reverse charge basis.
- Rate: Same as the IGST rate applicable to the imported goods.

2. Reimbursement of Stamp Tax:
- Liability: Yes, liable to pay GST on a reverse charge basis.
- Reason: Supplier does not fulfill conditions to be considered a pure agent under Rule 33.

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