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TMI Blog2023 (9) TMI 122X X X X Extracts X X X X X X X X Extracts X X X X ..... 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. - TANISHA DUTTA, AND JOYJIT BANIK, MEMBER Applicant s Representative Heard : Mr Boudhayan Bhattacharyya, Advocate Ms. Stuti Bansal, Advocate Preamble A person within the ambit of Section 100 (1) of the Central Goods and Services Tax Act, 2017 or West Bengal Goods and Services Tax Act, 2017 (hereinafter collectively called the GST Act ), if aggrieved by this Ruling, ma ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... M model, the project Capex is being funded by a mix of public and private participation. Projects are awarded to the concessionaire under the terms that 40% of the Capex shall be paid by NMCG during the period of construction as a grant and the balance 60% of Capex shall be paid in 60 equal quarterly instalments over a 15-year period along with an interest on the 60% balance Capex payment, at an interest rate linked to SBI MCLR. 1.4 The applicant has made this application under sub-section (1) of section 97 of the GST Act and the rules made there under seeking an advance ruling whether the said quantum of interest on 60% of the capex, payable over and above on the consideration value at the rate linked to SBI MCLR attracts the levy of GST o ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ayment and interest paid at the rate linked to SBI MCLR is a time cost. 2.4 The applicant submits that the interest paid by KMDA to him is an attempt to minimize the loss incurred by the applicant arising out of the delayed payment of the 60% of Project Capex cost, which is received by the applicant by way of annuity after a considerable amount of time of completing the Project/Contract and that too not by a single one shot payment but by way of regular instalments. 2.5 Hence, it is plain that such payments towards interest is made by the KMDA at the rate linked to SBI MCLR in order to augment and/or partially reimburse the extra cost that is being incurred by the Applicant Company in borrowing the money which is required for completing the ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... interest payments serve to compensate for the loss incurred due to the delayed payment of the 60% Capex, which is received as annuity payments over an extended period after project completion. The interest rate, linked to SBI MCLR, reflects the time cost associated with such delayed payments. 2.9 Further, the annuity payment is essentially a deferred payment and therefore the recipient s loss must be factored in. Thus, the additional interest component paid by KMDA should be considered part of the consideration for the project and subjected to application of GST. 2.10 The instant works contract between the parties is a supply of service; hence the applicability of GST, calculation and discharging of tax liability on services shall arise at ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ms of such provision, GST will be calculated and determined on the interest quantum received as payments by the applicant. 2.13 The service by way of access to a road or a bridge on payment of annuity is exempted from GST in terms of Entry No. 23A of the Notification No. 12/2017. GST is exempted only on services falling under Heading 9967 by way of access to a road or a bridge on payment of annuity and the services provided by the applicant, in this case, do not come under Heading 9967. In the instant case, the nature of the works as per the Concession Agreement is not falling within the purview of this notification as the work does not anyway relate to construction of roads. Hence, the above referred notification for exemption of applicabi ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... Water Treatment project jointly by the National Mission for Clean Ganga (NMCG) Kolkata Metropolitan Development Authority under Hybrid Annuity Model (HAM) where the applicant will receive the consideration for such supply as follows: (i) 40% of the Capex shall be paid by NMCG during the period of construction; and (ii) the balance 60% of Capex shall be paid in 60 equal quarterly instalments over a 15-year period along with an interest on the 60% balance Capex payment, at an interest rate linked to SBI MCLR. 4.4 It therefore appears 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. ..... X X X X Extracts X X X X X X X X Extracts X X X X
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