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CS Professional · Goods and Services Tax (GST) and Corporate Tax Planning · Value of Supply

Gupta Textiles supplies fabric to Rao Garments for Rs 5,00,000. The agreed price is payable within 30 days. Rao pays 20 days late and Gupta charges Rs 12,000 as interest for the delay, which Rao pays. How is this interest treated for the value of that supply?

The interest is included, so the value becomes Rs 5,12,000. Section 15(2)(d) expressly brings interest, late fee or penalty for delayed payment of consideration into the value of supply, with no rate threshold or timing condition.

  1. AExcluded, as it is a financial charge not linked to the supply
  2. BIncluded in value, making the value Rs 5,12,000Correct
  3. CIncluded only if the interest exceeds 18 per cent a year
  4. DExcluded unless charged before the invoice is issued

Explanation

Section 15(2)(d) includes interest, late fee or penalty for delayed payment of any consideration for any supply in the value of supply. So value = 5,00,000 + 12,000 = Rs 5,12,000. Section 12(6) adds that its time of supply is when the supplier receives it.

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