Payment of equivalent annual installments and interest on late payments is due at GST: Telangana AAR

the Telangana Authority Bench for Advance Rulingscomposed of Members B. Raghu Kiran and SV Kasi Visweswara Rao, ruled that payment of equivalent annual installments made under the annuity model, including interest on late payments made to a contractor, is due as GST .

The plaintiff M/s. The Hyderabad Metropolitan Water Supply and Sewerage Board has filed a petition with the Telangana Advance Ruling Authority (AAR), raising the question whether the payment of an equivalent annual installment in as part of the model of annuities made by the plaintiff to the contractors, which also included the principal amount as interest, is liable or not for the payment of the GST.

The Applicant’s representative argued before the AAR that the Applicant makes payments to the contractor for works contracts over a period of 7 years. The representative claimed that the plaintiff was also paying interest to the supplier on the late payment and wanted to check if the interest was part of the assessed value in order to attract GST.

The AAR observed that section 15(2)(d) of the 2017 CGST Act provides that the value of the supply must include interest or late payment charges or penalties for late payment of any consideration for any supply. Accordingly, the AAR ruled that the monies paid by the plaintiff to the contractor, including interest on late payments, were subject to tax under the GST Act.

The AAR therefore concluded that the payment of an equivalent annual installment, including both principal and interest, under the annuity model was liable to the payment of GST.

Order number.: TSAAR Order No. 18/2022

Dated: 29.03.2022 (TELANGANA AAR)

Click here to read/download the order


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