Interest/Penalty charged by a Chit Company for delay in payment of Chit amount taxable at 12%:AP AAR

GST : Interest/penalty collected for delay in payment of monthly subscription of chit fund by members has to be classified under Heading No. 9971 as 'financial and related services'

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AUTHORITY FOR ADVANCE RULINGS

Ushabala Chits (P.) Ltd., In re

D. RAMESH AND M. SREEKANTH, MEMBER

AAR NO. 13/AP/GST/2020

Classification of services - Andhra Pradesh Goods and Services Tax Act, 2017 - Chit fund activities - Heading No. 9971 [Financial and related services] - Applicant is engaged in conducting of chits - Sometimes applicant collects penal interest/penalty for delayed payment of instalments from members - It is undisputed that additional amount being charged on delayed payment termed as interest, late fee, fine or penalty cannot be bifurcated as such additional payment does not have its own classification and it takes colour from original supply i.e. supply of financial and related services - Whether in view of aforesaid, additional amount being charged for delay in payment by whatever name called , has to be classified as principal supply and classification of same cannot differ from original supply - Held, yes - Whether, therefore, interest/penalty collected for delay in payment of monthly subscription of chit fund by members has to be classified under Heading No. 9971 as 'financial and related services' - Held, yes. [Para 7.4]

Circulars and Notifications : Notification No. 11/2017 C.T.-(Rate) dated 28 -06-2017.

Notification No. 12/2017 C.T.-(Rate) dated 28-06-2017

Circular No. 102/21/2019-GST dated 28-06-2019