Page 92 - GSTL_20th August 2020_Vol 39_Part 3

306 GST LAW TIMES [ Vol. 39
(C) Further attention is invited to the Circular No. 102/21/2019-GST,
dated 28-6-2019 issued by the CBIC, wherein it was clarified that in
cases involving interest or penal interest on delayed payment of
EMI are not leviable to GST as the said amount is treated as part of
Actionable Claim and being interest on deposit extended in terms of
Notification No. 12/2017-C.T. (Rate) supra.
(D) The consideration towards the foreman services is represented by
5% of prize money on which the applicant is already discharging
the GST liability.
(E) In view of the above, the interest/penalty collected for delay in
payment of subscription amount is treated as neither supply of
goods nor supply of services and cannot be levied to GST.
Interpretations in respect of Questions No. 2 is that since the activity is neither
supply of goods nor supply of services, the same cannot be charged GST, and the
question of classifying the services does not arise and no GST is payable on the
said activity.
6. Record of personal hearing :
The authorised representative of the applicant, Shri R. Narasimha
Murthy appeared in person for Personal Hearing held on 5-2-2020 and he reiter-
ated the submissions already made in the application and requested to pass nec-
essary orders.
7. Discussion and findings
The Advance Ruling Authority observed the facts of the case, and the
documents on record submitted by the applicant. The applicant, M/s. Usha Bala
Chits Private Limited, Eluru is dealing in finance and related services and en-
gaged in conducting of chits. They have been paying GST on the foreman com-
mission and claiming exemption on the money part being auction in money.
Sometimes the company collects penal interest for delayed payment of instal-
ments from the members.
The words chit and foreman of a chit are defined in explanation given at
Entry No. 15 (SAC Code 9971) Financial and related services as follows :
(a) “chit” means a transaction whether called chit, chit fund, chitty, ku-
ri, or by whatever name by or under which a person enters into an
agreement with a specified number of persons that every one of
them shall subscribe a certain sum of money (or a certain quantity of
grain instead) by way of periodical instalments over a definite peri-
od and that each subscriber shall, in his turn, as determined by lot or
by auction or by tender or in such other manner as may be specified
in the chit agreement, be entitled to a prize amount;
(b) “foreman of a chit fund” shall have the same meaning as is assigned
to the expression “foreman” in clause (j) of section 2 of the Chit
Funds Act, 1982 (40 of 1982).
Advance ruling is sought on the matter whether there is any Tax Liability on
such additional amount (termed as Interest) charged on delayed payment?
7.1 The question is regarding the Classification of additional amount
termed as interest is being charged on the delayed payment from customers.
The GST Act, 2017 mentioned the value of supply, vide Section 15(2)
“shall include - (d) - interest or late fee or penalty for delayed pay-
ment of any consideration for any supply”;
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