GST on penal interest: taxable when part of a goods supply, exempt if genuine loan interest charged by lender. Penal interest on delayed EMI payments is taxable when charged by the seller as part of the goods transaction and must be included in the value of supply; penal interest charged by a third party lender as interest on a loan falls under the notified exemption for loan interest and is not subject to GST. Charges that do not qualify as 'interest' (service fees or other lender charges) are not exempt. Penal interest is not treated as a Schedule II liquidated damages service where it meets the notification's definition of interest.
Cases where this provision is explicitly mentioned in the judgment/order text; may not be exhaustive. To view the complete list of cases mentioning this section, Click here.
Provisions expressly mentioned in the judgment/order text.
GST on penal interest: taxable when part of a goods supply, exempt if genuine loan interest charged by lender.
Penal interest on delayed EMI payments is taxable when charged by the seller as part of the goods transaction and must be included in the value of supply; penal interest charged by a third party lender as interest on a loan falls under the notified exemption for loan interest and is not subject to GST. Charges that do not qualify as "interest" (service fees or other lender charges) are not exempt. Penal interest is not treated as a Schedule II liquidated damages service where it meets the notification's definition of interest.
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