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of <h1>GST Circular Clarifies Taxability of Penal Interest on Delayed EMI: Exempt for Lenders, Taxable for Sellers.</h1> The circular clarifies the applicability of GST on additional or penal interest for delayed EMI payments. It distinguishes between two scenarios: when a seller charges penal interest as part of a taxable supply (e.g., mobile phone sale), the interest is included in the value of the supply and is taxable. However, when penal interest is charged by a lender (e.g., M/s ABC Ltd.) for a loan, it is exempt from GST under notification No. 12/2017. The circular emphasizes that penal interest does not fall under the CGST Act's entry for tolerating an act, as it qualifies as 'interest' under the notification.
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