Page 90 - GSTL_20th August 2020_Vol 39_Part 3

304 GST LAW TIMES [ Vol. 39
be treated as interest but was penalty - Exemption granted under Serial No. 27
of Notification No. 12/2017-C.T. (Rate) not applicable on the transaction - C.B.I.
& C. Circular No. 102/21/2019-GST, dated 28-6-2019 clarifying that any service
fee/charge or any other charges that are levied by company in respect of the
transaction relating to extending deposits, loans or advances do not qualify to
be interest, and will not be exempted - Chit amount not actionable claim as per
Schedule-III to Central Goods and Services Tax Act, 2017 - Additional amount
being charged in delay of payment by whatever name called classifiable as
principal supply and classification of same not to differ from original supply -
Additional amount charged on delayed payment to be taxed as supply of fi-
nancial and related services at 12% GST as per Notification No. 8/2017-I.T.
(Rate) - Sections 8 and 15(2) of Central Goods and Services Tax Act, 2017. - It is
clear from the simple reading of Section 15(2) that the interest, late fee or penalty charged
from customer shall be added to the transaction value and hence shall be taxable at the
rate at which such goods/services are taxable or in other words the classification of inter-
est, late fee or penalty cannot be different from the classification of goods or services. [pa-
ras 7.1, 7.2, 7.3, 7.4]
Ruling in favour of department
DEPARTMENTAL CLARIFICATION CITED
C.B.I. & C. & Circular No. 102/21/2019-GST, dated 28-6-2019 ................................................. [Paras 5, 7.2]
REPRESENTED BY : Shri R. Narasimha Murthy, for the Assessee
[Order]. - The present application has been filed under Section 97 of the
Central Goods & Services Tax Act, 2017 and Andhra Pradesh Goods & Services
Tax Act, 2017 (hereinafter referred to as CGST Act and APGST Act respectively)
by M/s. Usha Bala Chits Private Limited, 25-2-12-2, Usha Bala Complex, John
Street, Narasimharao Pet, Eluru. A.P. (hereinafter referred to as applicant), regis-
tered under the Goods & Services Tax.
2. The provisions of the CGST Act and APGST Act are identical, except
for certain provisions. Therefore, unless a specific mention of the dissimilar pro-
vision is made, a reference to the CGST Act would also mean a reference to the
same provision under the APGST Act. Further henceforth, for the purposes of
this Advance Ruling, a reference to such a similar provision under the CGST or
APGST Act would be mentioned as being under the GST Act.
3. Brief facts of the case :
The applicant is a company engaged in conducting chit auctions for the
past 36 years and is one of the longest standing organisations. They register the
members and conduct auction in respect of each chit each month. The member
winning the auction will collect the prize money from the company. The compa-
ny will be collecting subscriptions from members by dividing the prize money
with number of members. The applicant is collecting the foreman commission @
5% from the amount to be distributed to the member taking the prize money.
The GST is paid on the foreman commission @ 12%. The foreman is responsible
for registering the members, collection of money from the members, conduct of
auctions and other related matters.
The applicant is responsible to pay the prize money by due date to the
winner of auction. Therefore, collection of amount from members is mandatory
for payment of prize money to the winner by due date. However, many a time,
the subscribers fail to deposit subscriptions by the specified date. In such scenar-
io, the applicant is borrowing the money from banks by payment of interest and
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