Interest on delayed payment of 60% Capex constitutes part of consideration for services and attracts GST under section 15(2)(d)

The AAR, West Bengal held that interest payable by KMDA to the applicant for delayed payment of 60% Capex constitutes part of the consideration for services supplied. Under section 15(2)(d), such interest must be included in the value of supply and is subject to GST. The applicant's counsel conceded that GST would be payable on interest received. The ruling confirms that interest on delayed consideration payments, calculated at SBI MCLR rates, forms part of the taxable value of supply.

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Issues involved:
The judgment involves determining whether the interest amount on 60% of the capex, payable over and above the consideration value at the rate linked to SBI MCLR, attracts the levy of GST or not.

Applicant's Submission:
The applicant, a concessionaire awarded a Water Treatment project, argues that the interest paid by the Project Authority is to compensate for the loss incurred due to delayed payment of the 60% Capex, which is received as annuity payments over time. They contend that this interest should not be liable for GST as it does not form a part of the value of the project. However, during the personal hearing, the applicant's advocates acknowledged that tax would be calculated on the interest amount received.

Revenue's Submission:
The revenue officer did not express any view on the issue raised by the applicant.

Observations & Findings of the Authority:
The Authority noted that the applicant would receive 40% of the Capex during construction and the remaining 60% in instalments with interest linked to SBI MCLR. As per Section 15 of the GST Act, interest for delayed payment of consideration is included in the value of supply. Therefore, the interest on the 60% Capex should be considered a part of the project's value and subjected to GST.

Ruling:
The Authority ruled that the interest on 60% of the capex, payable over and above the consideration value at the rate linked to SBI MCLR, will be considered a part of the value of supply and taxed accordingly.

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