Page 95 - GSTL_20th August 2020_Vol 39_Part 3

2020 ] IN RE : USHA BALA CHITS PVT. LTD. 309
In the instant case, having regard to the nature of transaction it cannot be said
that the chit company has extended any deposit, loans or advances to its custom-
ers hence the additional amount being charged cannot be treated as interest
hence the exemption granted under Entry No. 27 of Notification No. 12/2017 is
not applicable on the transaction on which advance ruling is sought.
It is further clarified in Circular No. 102/21/2019-GST, dated 28th June,
2019 that “any service fee/charge or any other charges that are levied by M/s.
ABC Ltd. in respect of the transaction relating to extending deposits, loans or
advances does not qualify to be interest as defined in Notification No. 12/2017-
Central Tax (Rate), dated 28th June, 2017, and accordingly will not be exempt”.
7.3 The applicant further stated that vide Notification No. 11/2017-C.T.
(Rate), dated 28-6-2017, the law prescribes GST on the foreman commission and
not on chit amount, being actionable claim as per Schedule III of GST Act, 2017.
On examination of acts and rules prevailing it is opined that the chit amount is
not an actionable claim and it defines under Section 3 of Transfer of Property
Act, 1982 as “a claim of any debt, or to any beneficial interest in movable proper-
ty other than the debt secured by mortgage of immovable property or by hy-
pothecation or pledge of movable property, not in possession, either actual or
constructive, of the claimant, which the Civil Courts recognize as affording
grounds for relief, whether such debt or beneficial interest be existent, accruing,
conditional or contingent.”
Here if we observe the difference between lottery ticket and railway tick-
et, a lottery ticket is actionable claim and railway ticket is not actionable claim.
Purchase of a railway ticket gives the right to a person to travel by railway. It is
nothing other than a contract of carriage. It clearly clarified that assignment of
right of recovery of unsecured debt is actionable claim. Therefore chit amount
will not come under purview of actionable claim.
7.4 The additional amount being charged in delay of payment by what-
ever name called should be classified as principal supply and the classification of
the same cannot differ from the original supply. Hence the additional amount
charged on delayed payment shall be taxed as per original supply i.e. supply of
financial and related services.
8. Accordingly we pass the following order.
RULING
Query : Whether the interest/penalty collected for delay in payment
of monthly subscription by the members forms a supply un-
der GST?
Answer : Affirmative.
Query : If the said interest/penalty is a supply, what is the classifica-
tion and rate of duty applicable on the said supply?
Answer : It is classified under Sl. No. 15 of Heading 9971 Financial and
related services, GST @ 12% as per Notification No. 8/2017-
Integrated Tax (Rate), dated, the 28th June, 2017 as amended
from time to time.

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GST LAW TIMES  20th August 2020  95