Interest recovered from employees on loan given

[Kaustubh Karandikar]

XYZ Pvt. Ltd. Is recovering Interest from employees towards personal loan given to them. Is XYZ required to pay GST on the interest received?

[Rajagopalan Ranganathan]

Sir,

According to Sl. No. 27 of Notification No. 12/2017-CT (Rate) dated 28.6.2017 as amended "extending deposits, loans or advances in so far as the consideration is represented by way of interest or discount (other than interest involved in credit card services) is chargeable to CGST @ 'Nil' rate. Similar exemption is available under IGST Act also.

[KASTURI SETHI]

In simple words, only penal interest is taxable under GST Acts.

[CA Hemanth Kumar]

Agreed with the experts view.

GST will be applicable only on the following interests

1. Interest which is collected for delay payment of consideration.

2. Credit card Interest.

[KASTURI SETHI]

Dear Sir,

Is interest on credit card penal interest or in routine way ? Pl.quench my thirst for knowledge on this issue.

[KASTURI SETHI]

Dear Sir,

GST is payable on interest recovered on credit card, if the payment was delayed by the consumer. Am I right ?

[Kaustubh Karandikar]

yes kasturi ji, in my view payable.

[CA Hemanth Kumar]

Dear Kasturi sethi sir,

For credit card, whether it is normal interest or penal interest GST will be applicable on both.

[CA Hemanth Kumar]

Dear Sir,

Interest exemption entry will be as follows

Services by way of-

(a) extending deposits, loans or advances in so far as the consideration is represented by way of interest or discount (other than interest involved in credit card services);

(b) inter se sale or purchase of foreign currency amongst banks or authorised dealers of foreign exchange or amongst banks and such dealers.

[KASTURI SETHI]

Agreed, Sir. Thanks a lot for your reply.

[CA Hemanth Kumar]

Welcome sir.

Im in the process of learning and sharing. Need to learn a lot from experts like u sir.

[KASTURI SETHI]

Dear Sir,

A person whose articles are published in EXCUS CD he is not at learning stage. He is a learned person. If you say that you are at a learning stage, it is your humbleness and politeness and greatness. Thanks and regards for your such disciplined and liberal behaviour.

AI Summary

GST exemption on interest for loans applies broadly, but credit card interest and penal/late payment interest are taxable.
Extending deposits, loans or advances where the consideration is represented by interest or discount is subject to a nil rate under Notification No. 12/2017 CT (Rate) and similarly under IGST; however, interest involved in credit card services and interest charged for delayed payment (penal/late payment interest) are excluded from that exemption and treated as taxable.