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of <h1>GST on Penal Interest: Seller Charges Subject to GST, Loan Provider Charges Exempt. Clarification on Liquidated Damages.</h1> The circular clarifies the applicability of GST on additional or penal interest for delayed payments of EMIs. It distinguishes between two cases: in the first, where a seller charges penal interest on delayed payments, it is included in the value of the supply and subject to GST. In the second case, where a loan provider charges penal interest, it is exempt from GST under a specific notification. The circular further clarifies that penal interest does not fall under the category of liquidated damages and that service fees or charges by lenders are not exempt from GST.
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