• Home
  • Article
  • GST Applicable on interest part of Equated Yearly Installment paid under Annuities Model by Local Authority: AAR

CA Pratibha Goyal | Mar 31, 2022 | Views 198396

GST Applicable on interest part of Equated Yearly Installment paid under Annuities Model by Local Authority: AAR

GST Applicable on interest part of Equated Yearly Installment paid under Annuities Model by Local Authority: AAR

The applicant M/s. Hyderabad Metropolitan Water Supply and Sewerage Board (HMWS&SB) is making payments to the contractors in equated yearly installment manner wherein such equated yearly installment consists of both principal amount and interest on such delayed payment. The applicant is desirous of ascertaining their liability on payment of GST on interest for delayed payment.

Questions raised by the Applicant:

  1. HMWS&SB being a local authority, is the payment of Equated Yearly Installment (which includes Principal and Interest) under the Annuities Model is liable for payment of GST or Not? If Yes Classification of service and the applicable rate of GST payable?
  2. Applicability of Entry No. 3 of the Notification Number 12/2017 – Central Tax (Rate), dated 28th June, 2017 for payment of interest included in Equated Yearly Installments under Annuities Model, being payment of interest is a Pure Service?

Advance Ruling

As per the Authority of Advance Ruling (AAR) clause (d) of sub-section 2 of Section 15 clearly states that the value of supply shall include interest or late fee or penalty for delayed payment of any consideration for any supply. Therefore all the monies paid to the contractor by the applicant including the interest on delayed payments is liable to tax under CGST Act, 2017 under this provision.

Thus GST is applicable on Interest being part of the consideration as per the valuation rules.

Further, the Authority added that in view of the above discussion question of Applicability of Entry No. 3 of the Notification Number 12/2017 – Central Tax (Rate), dt: 28th June, 2017 does not arise.

StudyCafe Membership

Join StudyCafe Membership. For More details about Membership Click Join Membership Button

Join Membership

In case of Any Doubt regarding Membership you can mail us at [email protected]

Join Studycafe's WhatsApp Group or Telegram Channel for Latest Updates on Government Job, Sarkari Naukri, Private Jobs, Income Tax, GST, Companies Act, Judgements and CA, CS, ICWA, and MUCH MORE!"




Author Bio

My Recent Articles

Tax Audit Due Date for AY 2022-2023 Extended by CBDT Benefit of extended time limit to avail ITC till Nov 30 applicable for FY 21-22 as well: CBIC helpdesk clarifies Know the new due date for claiming ITC for FY 21-22! No its not 30th Nov Finance Act provisions of sections 100 to 114 related to GST notified w.e.f. 1st Oct 2022 Land cannot be Capital Asset when assessee has not incurred any ‘cost of acquisition’: ITAT View All Posts

Leave a Reply