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of <h1>Karnataka clarifies GST on penal interest: Taxable for goods, exempt for loans from financial institutions.</h1> The circular issued by the Karnataka Department of Commercial Taxes clarifies the applicability of GST on additional or penal interest for delayed EMI payments. It addresses two scenarios: In the first case, penal interest charged on delayed payments for goods is taxable under GST as it forms part of the supply value. In the second case, penal interest on loans from a financial institution is exempt from GST under a specific notification. The circular further clarifies that penal interest does not fall under the taxable category of liquidated damages, and any additional charges by financial institutions do not qualify as interest for exemption purposes.
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