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 on interest: interest received is taxable and suppliers must raise a debit for the interest component. Interest charged to customers for delayed payment is subject to GST; the supplier must raise a debit note for the interest component because the interest is treated akin to a penalty for not paying dues on time. A separate query about interest received from a lender for early repayment is referred to an earlier reply without a distinct resolution in the record.