Interest Received in GST Period for supply made in Pre GST Period

[Abhijeet Mumbai]

Company received interest from customer on delay payment of consideration for sale of goods made under Bihar VAT for goods taxable @5%. Now GST officer is demanding GST @18% on this interest. Whether GST is levy on such interest received on account of supply made pre-GST period.

[Pinnacle Tax Advisor]

As per section 15(2)d of CSGT Act, interest on late payment from customer is the part of taxable value of supply. Hence liable for Tax under GST.

Section 12(6) , the time of supply to the extent it relates to an addition in the value of supply by way of interest, for delayed payment of any consideration shall be the date on which the supplier receives such addition in value.

therefore, if you receive the interst now, time of supply will be the date of receipt of payment and it will attract GST

AI Summary

Taxable value inclusion: interest on delayed payment for pre GST supply attracts GST when the interest is received under time of supply rules. Interest on delayed payment for a pre GST supply is included in the taxable value under section 15(2)(d), and the time of supply for that interest is the date the supplier receives the interest under section 12(6), so interest received in a GST period will be taxable in that period.