The Telangana Bench of Authority for Advance Ruling ( AAR ) has held that equated yearly installment and interest on delayed payment is liable to GST.
The applicant M/s. Hyderabad Metropolitan Water Supply and Sewerage Board is making payments to the contractors in equated yearly installment manner where in such equated yearly installment consists of both principal amount and interest on such delayed payment. The applicant is desirous ascertaining their liability on payment of GST on interest for delayed payment.
The authorized representatives of applicant namely Smt. Kedareswari, CA and Sri. Rajaram, CA reiterated their averments that they are making payments to supplier of works contract services in a staggered manner over period of seven years. They are also making payment of interest to the supplier of service on this spread over payments. Further, submitted that they are desirous of ascertaining whether the interest forms part of taxable value.
The Coram of Sri B. Raghu Kiran, IRS, Additional Commissioner (Central Tax) and Sri S.V. Kasi Visweswara Rao, Additional Commissioner (State Tax) has held that “the clause (d) of sub section 2 of Section 15 clearly states that the value of supply shall include interest or late fee or penalty for delayed payment of any consideration for any supply. Therefore all the monies paid to the contractor by the applicant including the interest on delayed payments is liable to tax under CGST Act, 2017 under this provision”.
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