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

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, 2017, interest for delayed payment forms part of supply value. Per Section 12(6), time of supply for interest is when the supplier actually receives such payment. The supplier may issue debit notes under Section 34 for delayed payment interest, but GST liability arises only upon actual receipt of the interest amount, not when demanded or debited to purchaser's account.

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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).

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