Interest, late fee or penalty received in GST regime w.r.t. services rendered before 01.07.2017 are liable to GST

Chennai Port Trust, In re - [2019] 108 taxmann.com 484 (AAR - TAMILNADU)

The applicant is a supplier of port services. It has filed an application for advance ruling to determine the taxability under GST of interest, late fee or penalty received on or after 01.07.2017 in respect of services except continuous supply of services rendered before 01.07.2017.

The Authority for Advance Rulings, Tamil Nadu observed that the applicant leases/rents the port space and collects lease rentals. The applicant has collected interest/late fee/penalty for the delayed payment of consideration in the GST regime for the original service rendered before GST implementation, i.e., before 01.07.2017. Separate invoices are raised by the applicant after 01.07.2017 for claiming such interest/late fee/penalty.

Payment of interest/late fee/penalty is a part of contract for supply of services to the port user in the course of business of the applicant. The applicant has tolerated the act of delayed payment of consideration of lease/rent. Therefore, this tolerance on the part of the applicant for the delayed payment of lease/rent by collecting interest/late fee/penalty is a separate supply of service. Since the payment received and invoice issued for interest/late fee/penalty is after 01.07.2017, GST is applicable on the same.

The Authority for Advance Rulings, Tamil Nadu held that interest, late fee or penalty received on or after 01.07.2017 in respect of services rendered before 01.07.2017 are liable to GST.

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