Supply under GST — Section 15 of CGST Act— The applicant raised the following questions and requested to pass ruling on the following issues.

1) Whether the interest/penalty collected for delay in payment of monthly subscription by the members forms a supply under GST?

2) If the said interest/penalty is a supply, what is the classification and rate of duty applicable on the said supply?

The question is regarding the Classification of additional amount termed as interest is being charged on the delayed payment from customers.

Held that— In the instant case, having regard to the nature of transaction it cannot be said that the chit company has extended any deposit, loans or advances to its customers hence the additional amount being charged cannot be treated as interest hence the exemption granted under entry no 27 of Notification No.12/2017 is not applicable on the transaction on which advance ruling is sought.

The additional amount being charged in delay of payment by whatever name called should be classified as principal supply and the classification of the same cannot differ from the original supply. Hence the additional amount charged on delayed payment shall be taxed as per original supply i.e. supply of financial and related services.
It is classified under SI.No.15 of Heading 9971 Financial and related services, GST @12%—Ushabala Chits Private Limited, In Re… [2020] 25 TAXLOK.COM 078 (AAR-AP)