Delayed Payment Charges under GST | Late fees | Interest

• Whether “Delayed Payment Charges” collected by a company from its clients liable to GST?
  • Company is providing service to its client by arranging for the initial funding of the balance portion of trade value.
  • The charges levied by Company i.e. Delayed Payment Charges is nothing but a consideration received for providing taxable services (of initial funding). Such activity qualifies under the term “Supply” as defined under Section 7 of the CGST Act.
  • Since the above transaction is a supply as defined under Section 7 of the CGST Act, the same is liable to GST.
  • Various different opinions are provided in the market. Some are of the view that since, it is related to goods, GST should not be charged.
  • However, as explained above, it is purely a service and hence, GST will be leviable

Delayed Payment Charges under GST | Late fees | Interest:

• If yes, what is the GST rate applicable on the same and what would be the time of supply for discharge of GST liability on such charges?
  • Company is providing a service to its customer by deploying its own capital on behalf of client for execution of trade; the same is being recovered by way of monthly recoveries from the customers. Such activity is being provided by company in the course of furtherance of business for the specific consideration. As a result such recoveries would be classified as services under supply and tax would be levied @ 18%.
  • Further the time of supply of services is being explained under Rule 47 of CGST Rules 2017 read with Section 13(6) of CGST Act:
  • The time limit for issuing a tax invoice for supply of services; shall be the date on whihc supplier receives such addition in value.

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