GST ON AN ACT TO TOLERATE UNDER SECOND SCHEDULE.

[Sadanand Bulbule]

Dear Sirs

State Small Industrial Development Corporation(SSIDC) allots plots/sheds to MSME's on certain conditions. One of the conditions of allotment of plots is that, the allottee shall construct the industrial shed within the stipulated period.In case of violation, SSIDC reserves the right to levy penalty and extend the time for completion of of the project. The query is whether GST is to be levied on such penalty amount for delayed completion of project?

My understanding is as under:

Valuation of Supply. SECTION 15.

Section 15(d) provides inter alia,' interest or late fee or penalty for delayed of payment of any consideration of any supply'.

In terms of Para 5(e) of Second Schedule to the CGST Act,2017, agreeing to the obligation to refrain from an act or to tolerate an act or a situation or to do an act.

Keeping in mind the above governing provisions, the allotment of plot by SSIDC, being immovable property not exigible to tax under the GST Act, whether Para 5(e) of Second Schedule read with Section 15(d) of the CGST Act would come into play?

Kindly throw light on the issue.

AI Summary

Debate on GST Applicability to Penalties by SSIDC for MSMEs: Section 15 and Para 5(e) Considered A query was raised regarding whether GST applies to penalties imposed by a State Small Industrial Development Corporation (SSIDC) for delayed construction of industrial sheds by MSMEs. The discussion referenced Section 15 of the CGST Act, which considers penalties as part of the valuation of supply, and Para 5(e) of the Second Schedule, which involves tolerating an act. One participant argued that penalties constitute a separate taxable service. An Advance Ruling from Goa was cited, supporting the view that such penalties are taxable under GST as they qualify as a supply of service.