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July 12, 2022

GST on the interest due on fixed annual instalments

by CA Shivam Jaiswal in GST, Legal Court Judgement

GST on the interest due on fixed annual instalments

Facts and Issue of the Case

APIIC Limited was incorporated under Companies Act, 1956 on 26.09.1973 and is wholly owned undertaking of Government of Andhra Pradesh. APIIC Limited allots the land to the SC/ST/BC entrepreneurs duly collecting certain percentage of the land cost from the entrepreneurs at the time of allotment of land and the sale agreement for the same will be executed on satisfaction of certain allotment conditions by the entrepreneur. With regard to the balance amount of the land cost, the same will be collected from the entrepreneur in annual installments along with interest duly providing moratorium period.

The applicant seeks advance ruling on the following:

APIIC allots the land to the SC/ST/BC entrepreneurs by collecting 25% of the land cost from the entrepreneurs at the time of allotment of land and the sale agreement for the same will be executed on satisfaction of certain allotment conditions by the entrepreneur. With regard to the balance 75°/u of the land cost, the same will be collected from the entrepreneur in 8 equal annual installments © 16% p.a rate of interest duly providing 2 years moratorium period. The entire interest income on the balance land cost is being recognized in the Financial Year in which the sale agreement is executed.The applicant approached this authority seeking a clarification, whether the interest amount receivable on the balance land cost is taxable under GST or not.

Observation by the Court

The Court had examined the issues raised in the application. The taxability of the goods and services supplied or to be supplied, as governed under the provisions of respective GST Acts are examined to decide the question involved in the present Ruling.As seen from the application, it is clear that APIIC allots the land to the SC/ST/BC entrepreneurs by collecting 25% of the land cost from the entrepreneurs at the time of allotment of land, while the remaining 75% of the land cost will be collected from the entrepreneur in 8 equal annual instalments © 16% p.a rate of interest duly providing 2 years moratorium period. The entire interest income on the balance land cost.

 In the instant case the applicant, APIIC had given a facility to the beneficiaries, by extending the service of fixation of annual instalments with an interest 16% p.a for delayed payment of 75% of total consideration over a period of time. In such a case, the interest on the credit facility allowed by the applicant is part of the value of taxable supply and shall be liable to GST.

Conclusion

Question: Whether the interest amount receivable on the annual instalments fixed by the applicant is liable to GST or not.

Answer: Affirmative

GST-on-the-interest-due-on-fixed-annual-instalments

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