INTEREST ON LATE PAYMENT RECEIVED OF SALE

[NAREN KHATRI]

HI.. SIR/S..

NEED TO ISSUE DEBIT NOTE TOWARDS INTEREST ON LATE PAYMENT RECEIVED TOWARDS SALES.

IS THIS INTEREST LIABLE TO GST..??

THANKING YOU IN ADVANCE..

[Rajagopalan Ranganathan]

Sir,

As per Section 15 (2) (d) of CGST Act, 2017 " the value of supply shall include interest or late fee or penalty for delayed payment of any consideration for any supply." Therefore any interest collected on late payment received towards sales is liable to GST.

[NAREN KHATRI]

Thank you very much sir.. for quick reply.

will you let me know GST % for the said interest..? so, i shall make debit note accordingly with interest + gst.

[KASTURI SETHI]

Yes. GST is applicable on interest under Section 15 of CGST Act.

[Rajagopalan Ranganathan]

Sir,

The rate of gst will be the rate applicable to the goods/services supplied by you.

[Himansu Sekhar]

The interest will be a part of the value. The same rate as that of the goods

AI Summary

Taxability of interest on late payment: interest forms part of taxable value and attracts GST at underlying supply rate.
Interest charged for late payment of consideration is included in the taxable value of supply and therefore subject to GST; the rate applied to such interest is the same as the rate applicable to the underlying supply. Suppliers should issue a debit note showing the interest and apply GST at the original supply's rate, aggregating interest into the invoice value for tax calculation and reporting.