2023 (12) TMI 937 - AAR - GST

GST on delayed payment interest payable on receipt basis not accrual basis under Section 15(2)(d) CGST Act

In Re: M/s. Pink City Steel Rolling Mills Pvt Ltd,

The AAR, Rajasthan ruled that GST on interest for delayed payment is payable on receipt basis, not accrual basis. Under Section 15(2)(d) of CGST Act, ... Stage of payment of GST - Time of supply - delayed payment of interest that is not still paid by purchaser of goods - time of demand of interest/debit of interest in the account of purchaser of goods - Requirement to issue fresh invoice of interest for delayed payment be issued in spite of non-receipt of interest? - GST payable on accrual basis or not? HELD THAT:-As per Section 15 of CGST Act, 2017, 'The value of a supply of goods or services or both shall be the transaction value, which is the price actually paid or payable for the said supply of goods or services or both where the supplier and the recipient of the supply are not related and the price is the sole consideration for the supply Further, as per Section 15(2) of CSGT Act, 2017, lists out the compulsory inclusions in the value of supply wherein as per Section 15(2)(d) it has been clarified that - 'interest or late fee or penalty for delayed payment of any consideration for any supply', thus GST provisions have clearly outlined Interest will be a part of value of supply. Sec. 12(6) The time of supply to the extent it relates to an addition in the value of supply by way of interest, late fee or penalty for delayed payment of any consideration shall be the date on which the supplier receives such addition in value - Further applicant may raise debit note for interest on delayed payment under Section 34 of Act. GST on interest recovered is to be paid on the date on which the supplier of goods receives such addition in value on delayed payment of any consideration. Issues involved:The issues involved in the judgment are the determination of time and value of supply of goods or services, determination of the liability to pay tax on any goods or services, and the interpretation of GST provisions regarding delayed payment of interest.Issue 1: Determination of time and value of supply of goods or services:The applicant, a registered assessee under the GST regime, raised questions regarding the payment of GST on delayed interest payments by purchasers of goods. The applicant contended that GST should be paid at the time of recovery or accrual of interest, not at the time of demand or debit in the account. The jurisdictional officer referred to Section 12(6) of the CGST/RGST Act 2017, stating that GST should be paid on the date the supplier receives such addition in value through interest.Issue 2: Determination of the liability to pay tax on any goods or services:The applicant sought clarification on whether GST should be paid at the time of demand or debit of interest in the purchaser's account, and if a fresh invoice for delayed payment should be issued. The jurisdictional officer reiterated the provisions of Section 12(6) of the Act, emphasizing that GST is to be paid when the supplier receives the interest on delayed payment.Issue 3: Interpretation of GST provisions on delayed payment of interest:The applicant inquired whether GST should be paid on an accrual basis. The jurisdictional officer highlighted that GST on interest recovered should be paid when the supplier receives such addition in value on delayed payment of any consideration. The Advance Ruling Authority analyzed the provisions of the CGST Act and RGST Act, emphasizing the importance of Section 12(6) in determining the time of payment of GST on interest.Conclusion:The Advance Ruling Authority ruled that GST on delayed payment of interest by purchasers of goods should be paid on the date the supplier receives such addition in value. They clarified that a debit note may be issued under Section 34 of the Act for interest on delayed payments. The ruling is subject to the provisions under Section 103 of the GST Act unless declared void under Section 104(1).