Page 91 - GSTL_20th August 2020_Vol 39_Part 3

2020 ] IN RE : USHA BALA CHITS PVT. LTD. 305
making payment to the prized subscribers. In order to maintain discipline in
payment and also to cover the interest cost, the applicant charges inter-
est/penalty by whatever name called, from the members paying the subscrip-
tions belatedly and the interest is dependent upon the period of delay from spec-
ified date to actual date of payment. The interest/penalty has no element of ser-
vices except that it is in an auction in money inasmuch as it is collected as a part
of subscription for delay.
The applicant had filed an application in form GST ARA-01, dated 6-1-
2020, paying the prescribed amount of fee for seeking Advance Ruling.
4. Questions raised before the authority
The applicant raised the following questions and requested to pass rul-
ing on the following issues.
(1) Whether the interest/penalty collected for delay in payment of
monthly subscription by the members forms a supply under GST?
(2) If the said interest/penalty is a supply, what is the classification and
rate of duty applicable on the said supply?
On Verification of basic information of the applicant, it is observed that the ap-
plicant falls under State jurisdiction, i.e., Assistant Commissioner (ST), Eluru Cir-
cle, Eluru Division. Accordingly, the application has been forwarded to the juris-
dictional officers and a copy marked to the Central tax authorities to offer their
remarks as per the Sec. 98(1) of CGST/APGST Act, 2017.
In response, remarks are received from the jurisdictional officer con-
cerned stating that there are no proceedings lying pending or passed relating to
the applicant on the issue, for which the Advance Ruling sought by the appli-
cant.
5. Applicant’s interpretation of law and facts :
(A) The applicant submits that the interest/penalty by whatever name
it is called, collected from the subscribers for delay in the payment
of subscription amount cannot be treated as supply. In this connec-
tion, attention is invited to Sl. No. 6 to Schedule III to APGST Act,
2017, which defines Actionable claims to be neither supply of goods
nor supply of services. Since the prize money being paid to the
winning subscriber is actionable claim, it is not a supply within the
meaning of APGST Act, 2017. Even the Notification No. 11/2017-
C.T. (Rate), dated 28-6-2017 prescribers GST on the foreman com-
mission and not on chit amount, being actionable claim. It is further
submitted that interests on deposits is exempt from GST Act in
terms of Sl. No. 27 of the Notification No. 11/2017-C.T. (Rate), dated
28-6-2017.
(B) The applicant submits that in terms of Section 15(2)(d) of the
APGST Act, 2017, the value of supply includes interest or late pay-
ment or penalty for delayed payment of any consideration. There-
fore, the interest, penalty or late fees are considered as part and par-
cel of the consideration towards the execution of activity. Accord-
ingly, the interest/penalty collected for delay in payment of sub-
scription charges would be treated as a part of subscription charges,
which are not chargeable to GST.

GST LAW TIMES  20th August 2020  91