GST applicable on Interest / Late Fee / Penalty due to delayed payment of consideration received after its imposition: AAR [Read Order]

The Chennai Bench of Authority of Advance Rulings ( AAR ) in an application filed by M/s Chennai port Trust held that interest, late fee and penalty due to delayed payment of consideration received after imposition of GST liable to GST.

The applicant is engaged in the supply of port services and incidental supply of goods like disposal of discarded assets. They are notified as a major port by the Central Government under the Indian ports Act, 1908. The applicant has collected an amount as interest / late fee/penalty for delayed payment of consideration for the original service. This amount was received after July 1^st, 2017 and separate invoices Rent Claim Advance (RCA) Receipt are raised by the applicant.

The issue in the present case is the determination of the applicability of GST on receipt of interest, late fee, a penalty by the applicant.

The applicant has contended inapplication of GST on the ground that the supply is a continuous supply of services rendered before July 2017 i.e. introduction of GST.

The bench constituting of Members Ms M.G. Kata and T.K. Selvaan held that the amounts received on or after 01.07.2017 towards interest, late fee, penalty relating to the services of lease/rent, due to delayed payment of consideration for those services rendered by the applicant before 01.07.2017, are liable to GST. It has been held that there is a payment of a separate consideration for this tolerance of delayed payment of lease/rent. Thus, this tolerance on the part of the applicant for the delayed payment of lease/rent by collecting an interest/late fee/penalty is a separate supply of service as covered by Section 7(1)(a) of the CGST Act.