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of <h1>GST on Penal Interest: Taxable for Seller's Installments, Exempt for Third-Party Lender Loans under Notification.</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 on a product sold on installments, the interest is taxable as part of the product's value. However, when a third-party lender charges penal interest on a loan, it is exempt from GST under a specific notification. The circular emphasizes that penal interest does not fall under the taxable category of agreeing to tolerate an act, as it qualifies as 'interest' under the relevant notification, and any service fees or charges by lenders are not exempt.
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