GST on penal interest: interest charged by seller as part of supply is taxable; financier's interest may be exempt. The circular clarifies that penal interest charged by the seller as part of an installment sale must be included in the value of the supply of goods and is taxable, whereas penal interest charged by a separate financier qualifies as exempt 'interest' and is not subject to GST; fees or charges that do not meet the definition of interest remain taxable. Penal interest is not treated as a separate taxable service under the Schedule II entry for agreeing to tolerate or refrain from an act.
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: interest charged by seller as part of supply is taxable; financier's interest may be exempt.
The circular clarifies that penal interest charged by the seller as part of an installment sale must be included in the value of the supply of goods and is taxable, whereas penal interest charged by a separate financier qualifies as exempt "interest" and is not subject to GST; fees or charges that do not meet the definition of interest remain taxable. Penal interest is not treated as a separate taxable service under the Schedule II entry for agreeing to tolerate or refrain from an act.
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