Clarification regarding applicability of GST on additional penal interest

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....rom the trade and industry regarding applicability of GST on delayed payment charges in case of late payment of Equated Monthly Instalments (EMI). An EMI is a fixed amount paid by a borrower to a lender at a specified date every calendar month. EMIs are used to pay off both interest and principal every month, so that over a specified period, the loan is fully paid off along with interest. In cases where the EMI is not paid at the scheduled time, there is a levy of  additional / penal interest on account of delay in payment of EMI. 2.  Doubts have been raised regarding the applicability of GST on additional / penal interest on the overdue loan i.e. whether it would be  exempt from GST in terms of Sl. No. 27 of notification ....

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....ns to Y, the consideration for which is the interest of 2.5% per month and an additional / penal interest amounting to Rs. 500/- per month for each delay in payment. • Case - 2: X sells a mobile phone to Y. The cost of mobile phone is Rs. 40,000/-. Y has the option to avail a loan at interest of 2.5% per month for purchasing the mobile from M/s ABC Ltd. The terms of the loan from M/s ABC Ltd. allows Y a period of four months to repay the loan and an additional / penal interest @ 1.25% per month for any delay in payment. 4.  As per the provisions of sub-clause (d) of sub-section (2) of section 15 of the TNGST Act, the value of supply shall include "interest or late fee or penalty for delayed payment of any considera....

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....ive of the manner of invoicing. • Case 2: The additional / penal interest is charged for a transaction between Y and M/s ABC Ltd., and the same is getting covered under Sl. No. 27 of notification No. 12/2017-CentraI Tax (Rate) dated 28.06.2017 and Tamil Nadu Notification No. II(2)/CTR/532(d-15)/2017, dated 29.6.2017 [Issue No. 202]. Accordingly, in this case  the 'penal interest' charged thereon on a transaction between Y and M/s ABC Ltd. would not be subject to GST, as the same would not be covered under notification No. 12/2017-Central Tax (Rate) dated 28.06.2017 and Tamil Nadu Notification No. II(2)/CTR/532(d-15)/2017, dated 29.6.2017 [Issue No. 202]. The value of supply of mobile by X to Y would be Rs. 40,000/-....