Interest/penalty charged on delayed payment of subscription is a supply of service: AAAR

Case Details: Appellate Authority for Advance Ruling, Andhra Pradesh Ushabala Chits (P.) Ltd., In re - [2022] 137 taxmann.com 318 (AAAR - Andhra Pradesh)

Judiciary and Counsel Details

• • Peeyush Kumar and Naresh Penumaka, Member
  • R. Narasimha Murthy, AR for the Appellant.

Facts of the Case

The appellant was a company engaged in conducting chit auctions. It filed an application for advance ruling to determine whether interest/penalty collected for delay in payment of monthly subscription by the members would be treated as supply under GST. The Authority for Advance Ruling held that interest/penalty charged on delayed payment of subscription by members of chit fund would be supply under GST and liable to tax. It filed appeal against the order.

AAR Held

The Appellate Authority for Advance Ruling observed that the collection of delayed/defaulted instalments and penal interest thereon would be a service rendered in relation to chit. Therefore, the collection of defaulted instalments and interest thereon by foreman shall be considered as a supply of service in relation to chit and would fall under SAC 9971 as services shall be provided by foreman of chit fund in relation to chit.

Case Review

• • Ushabala Chits (P.) Ltd., In re [2020] 117 taxmann.com 827/82 GST 126 (AAR – A.P.) (para 7) reversed.

List of Cases Referred to

• • Ushabala Chits (P.) Ltd., In re [2020] 117 taxmann.com 827/82 GST 126 (AAR – AP) (para 1)
  • CIT v. Dr. Sham Lal Narula AIR 1963 Punj. 411 (para 5).