GST collected on late fee by Electricity board

[Ravikumar Doddi]

Dear sir,

Applicant is a manufacturer supplies goods to electricity board under a tender, usually they collect late fee/ penalty even in VAT regime and now under GST regime receipt of goods after specified date, will GST paid on such late fee/penalty is claimable by the applicant or not. Thanks in advance

[KASTURI SETHI]

Answer to your query is NO. GST paid on late fee and penalty has become an integral part of transaction value under Section 15 (2)(d) of CGST Act. It will be deposited into Govt.'s kitty for ever. The supplier (manufacturer) cannot claim.

[Ravikumar Doddi]

Dear sir,

Thank your very much for your swift response.

section 15(2)(d) interest or late fee or penalty for delayed payment of any consideration for any supplies, it means when recipient pays amount on supplies lately in that case interest charged by the supplier constitute transaction value. But in our case recipient charging late fee along with GST for delay in supply of goods. Do the supplier will get GST input or not.

[KASTURI SETHI]

(i) 999793 Agreeing to refrain from doing an act

(ii) 999794 Agreeing to tolerate an act

Either (i) or (ii) service has been supplied by Electricity Board to the manufacturer inasmuch as the Board has received the consideration in the form of late fee/penalty. Board has received the amount of penalty along with GST from the manufacturer (Applicant). Now the question arises how the manufacturer will prove that the above service (i) or (ii) has been utilized in the course of business or furtherance of business. Can you prove ? It is a hard nut to crack. In my view, ITC is not admissible.

AI Summary

GST on Late Fees for Delayed Delivery Non-Claimable; Input Tax Credit Not Admissible Under Section 15(2)(d) CGST Act An individual inquired whether GST paid on late fees or penalties charged by an electricity board for delayed goods delivery is claimable. A respondent clarified that under Section 15(2)(d) of the CGST Act, GST on such fees becomes part of the transaction value and cannot be claimed by the supplier. The inquirer further questioned if GST input is available when the recipient charges late fees. The respondent explained that the electricity board provides a service by tolerating the delay, and proving its use in business is challenging, thus input tax credit (ITC) is not admissible.