GST on surcharge for delayed payment

[Tax DEPTT]

If invoices/debit notes are issued for surcharge for delayed payment in telecommunications sector, is GST to be applied on such invoices/debit notes for surcharge? Is the GST on surcharge to be deposited on Billing or on collection? Kindly intimate the provisions of GST Act/Rules in this regard.

[KASTURI SETHI]

Surcharge is a type of penalty or late fee charged by the supplier of service. It must form part of taxable value/transaction value under Section 15 (2)(d) of CGST Act. GST is applicable.

[Himansu Sekhar]

It will be charged on billing.

[RAMESH PRAJAPATI]

GST is payable on penalty for delayed payment (surcharge in your case) on collection as per section 12(6) as under:-

Section 12 (6) of the CGST Act : The time of supply to the extent it relates to an addition in the value of supply by way of interest, late fee or penalty for delayed payment of any consideration shall be the date on which the supplier receives such addition in value.

AI Summary

GST on surcharge for delayed payment is taxable; time of supply for such additions is receipt of payment. Surcharge for delayed payment is treated as a penalty or late fee and forms part of the taxable/transaction value, so GST is applicable. While one reply indicates GST is charged on billing, Section 12(6) provides that the time of supply for additions by way of interest, late fee or penalty is the date the supplier receives the addition, implying GST on such surcharge is to be accounted on collection.