GST on penal interest: seller charged late interest is taxable; financier charged interest may be exempt under interest rules. Where a seller embeds credit in the sale of taxable goods and charges penal interest for delayed instalments, that penal interest is includible in the value of the taxable supply and taxable. Conversely, penal interest charged by an independent financer on a loan qualifies as interest under the relevant notification and is exempt from GST; the taxable value of the goods in that case excludes the financier's penal interest. Penal interest does not fall under Schedule II entry 5(e), while non interest service fees charged by a financer are taxable.
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: seller charged late interest is taxable; financier charged interest may be exempt under interest rules.
Where a seller embeds credit in the sale of taxable goods and charges penal interest for delayed instalments, that penal interest is includible in the value of the taxable supply and taxable. Conversely, penal interest charged by an independent financer on a loan qualifies as interest under the relevant notification and is exempt from GST; the taxable value of the goods in that case excludes the financier's penal interest. Penal interest does not fall under Schedule II entry 5(e), while non interest service fees charged by a financer are taxable.
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