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 interest now, time of supply will be the date of receipt of payment and it will attract GST

[Shilpi Jain]

This is in respect of a sale made earlier. It would be relevant to examine the transition provisions under GST. One could consider that there is no liability of GST on this interest as it is neither an upward price revision nor was any tax leviable on such amount under the erstwhile law.

AI Summary

GST on interest may arise when interest received for delayed payment and be taxable under time of supply rules. Interest received for delayed payment on a pre GST supply can be part of the taxable value under GST; statutory provisions treat interest on late payment as included in value and specify that additions to value by way of interest are treated as supplied on the date the supplier receives the interest, so GST liability arises in the period of receipt.