GST leviable on interest paid on late payment of invoices

Last updated: 28 June 2021
Quick Summary
The Gujarat Authority for Advance Ruling (AAR) has determined that Indian companies must pay GST on interest charged by foreign holding companies for late invoice payments. This is because such interest is considered part of the supply's value under Section 15(2)(d) of the CGST Act. Furthermore, the ruling stated that the holding company did not meet the criteria to be considered a 'pure agent' for stamp duty reimbursements, making those payments also subject to GST on a reverse charge basis.

Court :
AAR Gujarat

Brief :
The AAR Gujarat in the matter of M/S. Enpay Transformer Components India Private Limited [Advance Ruling No. GUJ/GAAR/R/01/2021, dated January 20, 2021] has held that Indian company is liable to pay GST on reverse charge basis for amount paid as interest to its holding foreign company on late payment of invoices of imported goods, as the same is to be included value of supply as per Section 15(2)(d) of the Central Goods and Services Act, 2017 ('CGST Act').

Citation :
Advance Ruling No. GUJ/GAAR/R/01/2021, dated January 20, 2021

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Bimal Jain
Published in GST
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