gst on interest premature repayment of deposits

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....st on interest premature repayment of deposits<br> Query (Issue) Started By: - Madhavan iyengar Dated:- 2-7-2019 Last Reply Date:- 14-7-2019 Goods and Services Tax - GST<br>Got 5 Replies<br>GST<br>X ltd is in business of lending money and accepts deposits from public and members for a fixed tenure say 12 months and interest rate will be 10% IF any customer wants premature repayment before 12 mont....

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....hs then has to forgo interest there will be reduction by 1% ie it will be 9% Issue: will this 1% reduction be liable for gst Reply By KASTURI SETHI: The Reply: Not liable to GST. Reply By Nandan Khambete: The Reply: Maharashtra AAR held that GST is payable on penal interest recovered by lender for delay in repayment of EMI. Accordingly to same logic, in this case since 1% is held back for pr....

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....epayment of deposit, i think GST will be applicable. Also, i think Department can hold it as a consideration for agreeing to the obligation to tolerate an act or a situation, which is treated as a supply of service under para 5(e) of Schedule II of the Central Goods and Services Act, 2017 (&quot;CGST Act&quot;). Reply By KASTURI SETHI: The Reply: IMO the same analogy is not applicable inasmuch ....

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....as here 1% reduction of interest can be termed as incentive or we may say it is a form of discount etc. to the consumer Such reduction does not take the shape of penal interest. I also solicit the views of other experts. Reply By Ganeshan Kalyani: The Reply: Yes, it is in the form of an incentive and not a penalty. Reply By DR.MARIAPPAN GOVINDARAJAN: The Reply: Reduction in interest rate c....

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....ould not be termed as incentive or discount. It is the offer of less benefit in case of earlier getting of the deposit. In my view it amounts to penalty for the depositor and this may attract GST. Other views are solicited.<br> Discussion Forum - Knowledge Sharing ....