X ltd is in business of lending money and accepts deposits from public and members for a fixed tenure say 12 months and interest rate will be 10%
IF any customer wants premature repayment before 12 months then has to forgo interest there will be reduction by 1% ie it will be 9%
Issue: will this 1% reduction be liable for gst
Is the 1% reduced interest rate for early withdrawal by X Ltd subject to GST under the CGST Act? X Ltd, a lending business, allows depositors to withdraw funds prematurely at a reduced interest rate of 9% instead of the standard 10%. A query was raised about whether this 1% reduction is liable for GST. Opinions varied: one view suggests it's not liable as it resembles an incentive or discount, not a penalty. Another perspective argues it might attract GST, as it could be seen as consideration for tolerating an act, akin to penal interest, under the Central Goods and Services Act. The discussion remains open for further expert opinions. (AI Summary)
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