Payment Of Equated Yearly Instalments And Interest On Delayed Payment Is Exigible To GST: Telangana AAR

[01 April 2022] The Telangana Bench of Authority for Advance Ruling has ruled that payment of Equated Yearly Instalments made under Annuities Model, including interest on delayed payments made to a contractor, is exigible to GST.
The Applicant M/s. Hyderabad Metropolitan Water Supply and Sewerage Board filed an application before the Telangana Authority for Advance Ruling (AAR), raising the query as to whether the payment of Equated Yearly Instalment under Annuities Model made by the Applicant to contractors, which included the principal amount as well as interest, is liable for payment of GST or not.
The representative for the Applicant submitted before the AAR that the Applicant is making payments to supplier of works contract services in a staggered manner over a period of 7 years. The representative averred that the Applicant is also making payment of interest to the supplier on the delayed payment and was desirous of ascertaining whether the interest forms part of taxable value so as to attract GST.
The AAR observed that Section 15(2)(d) of the CGST Act, 2017 provides that the value of supply shall include interest or late fee or penalty for delayed payment of any consideration for any supply. Therefore, the AAR ruled that money paid by the Applicant to the contractor including the interest on delayed payment was liable to tax under GST Act.