Late Delivery Charges

[Kaustubh Karandikar]

XYZ is receiving from PQR amount towards late delivery charges which will fall under the category of agreeing to the obligation to refrain from an act, or to tolerate an act or a situation, or to do an act and therefore XYZ will be liable to pay GST on the amount received. In this example, recipient of service is XYZ or PQR?

[KASTURI SETHI]

Tolerating, refraining from, agreeing to etc.is a service under GST. Who is tolerating ? Who is refraining from ? Who is agreeing to ? . XYZ is tolerating, refraining from, agreeing to by way of imposing late delivery charges upon PQR . So PQR is service receiver.

[DR.MARIAPPAN GOVINDARAJAN]

PQR is the service receiver.

[Kaustubh Karandikar]

If PQR is outside India, it will fall under Section 13(2) of IGST Act and since the recipient of service i.e. PQR is outside India, XYZ will not be liable to pay GST on it? Kindly confirm.

[KASTURI SETHI]

Very interesting issue. Worth to be examined in new situation. I agree with you , Sir.

[Alkesh Jani]

Dear Experts,

Can we apply Section 15 (d) of CGST Act,2017, in the Instant case?

Thanks,

With Regards,

I think PQR is the service receiver

[CASusheel Gupta]

In my view, the person booking the expenses shall always be recipient (PQR) and one booking income (XYZ) shall always be supplier.

As per section 15(2)(d) value of supply include interest or late fee or penalty for delayed payment of any consideration for any supply.

Therefore the POS for late payment charges shall be equivalent to original supply.

[Alkesh Jani]

Dear Kaustubh Karandikar,

In this regards, first of all it is to be decided that, late delivery charges received by the XYZ, is in relation to any Supply i.e. Goods or Services?. If this is the case, than PQR has already raised an Invoice and XYZ will deduct the amount of late delivery charges, this amount is to be included for valuation purpose, as per above mentioned section. but as Invoice of the same amount is raised PQR has nothing to do, but XYZ will book it as late delivery charges.

Now with regards to services mentioned above, the late delivery charges are not independent services rendered, the services mentioned is sort of independent in nature for example, Film artist under contract is restricted to undertake any Advt. during a period and some artist has to undergo some act (some reality shows) which they are to be tolerated example, playing with snake or something like that...

Based on above, I am of the view that late delivery charges cannot be classified as the services mentioned. Any different views, or any correct by our Hon'ble Experts is highly solicited.

With Regards,

AI Summary

Late delivery charges treated as supply; recipient is service payer, valuation includes late fees and place of supply follows original transaction.
Late delivery charges can constitute a supply of service where XYZ is treated as supplier and PQR as service recipient because XYZ is the party being tolerated or against whom an obligation is agreed. Late fees and penalties are includible in the value of the supply for GST valuation, and the place of supply for such charges is generally aligned with the original supply. If the payer is located outside India, IGST applicability and cross border tax consequences must be examined.