2023 (9) TMI 122 - AAR - GST

Levy of GST - amount of interest agreed to be paid by KMDA to the applicant due to the delayed payment of the 60% Capex should be considered as a part of the consideration for the project and levied to service tax or not - HELD THAT - KMDA has agreed to pay interest for delayed payment of consideration against supply of services and such interest will be included in value of supply in terms of clause (d) of sub-section (2) of section 15. The authorised advocate of the applicant, in course of personal hearing, has also expressed that GST will be payable on the interest quantum received as payments by the applicant. In the instant case, interest on 60% of the capex payable over and above on the consideration value at the rate linked to SBI MCLR will be a part of value of supply and would be taxed accordingly.

Summary

Issues involved:
The judgment involves determining whether the interest amount on 60% of the capex, payable over and above the consideration value at the rate linked to SBI MCLR, attracts the levy of GST or not.

Applicant's Submission:
The applicant, a concessionaire awarded a Water Treatment project, argues that the interest paid by the Project Authority is to compensate for the loss incurred due to delayed payment of the 60% Capex, which is received as annuity payments over time. They contend that this interest should not be liable for GST as it does not form a part of the value of the project. However, during the personal hearing, the applicant's advocates acknowledged that tax would be calculated on the interest amount received.

Revenue's Submission:
The revenue officer did not express any view on the issue raised by the applicant.

Observations & Findings of the Authority:
The Authority noted that the applicant would receive 40% of the Capex during construction and the remaining 60% in instalments with interest linked to SBI MCLR. As per Section 15 of the GST Act, interest for delayed payment of consideration is included in the value of supply. Therefore, the interest on the 60% Capex should be considered a part of the project's value and subjected to GST.

Ruling:
The Authority ruled that the interest on 60% of the capex, payable over and above the consideration value at the rate linked to SBI MCLR, will be considered a part of the value of supply and taxed accordingly.