GST on interest received

[Kaustubh Karandikar]

1) XYZ is registered with ‘MSME’ and as per the MSME provisions, customers who had not paid within the prescribed time limit, are paying interest to XYZ. Is XYZ liable to pay GST on the interest received? 2) XYZ had taken loan from PQR. The loan amount was re – paid before the due date and therefore as per the terms, PQR had paid interest to XYZ. Is XYZ liable to pay GST on the interest received?

[Ganeshan Kalyani]

1. Yes, GST is applicable on the interest received. Debit should be raised by the supplier for the interest part. Here the interest is like penalty for not paying the dues in time.

[Ganeshan Kalyani]

Refer Sri Kasturi Sir's reply to issue ID 115266 which is applicable to your first query.

AI Summary

GST Applicable on Interest from Late Payments and Early Loan Repayment; Issue Debit Note for Interest Portion XYZ, registered under MSME, receives interest from customers for late payments and from PQR for early loan repayment. The query is whether GST applies to these interest payments. According to the response, GST is applicable on the interest received, as it is considered a penalty for late payment. The supplier should issue a debit note for the interest portion. For further clarification, a reference is made to a previous discussion on a similar issue.