QUESTION

Mr. A was registered under the GST Act. For the period July’19-Dec’19, he provided professional/technical services to his client (XYZ Pvt. Ltd.) for Rs 2 crores. All the invoices raised during this period was duly reported in GSTR-1 and GST was paid through GSTR-3B filed for the period July’19-Dec’19. Later, due to some conflicts, XYZ refused to pay the whole consideration to Mr. A for the services rendered by him during the period July’19-Dec’19. Mr. A surrendered his GST registration in the m/o Jan’20 due to non-continuance of business activities. Mr. A sued XYZ Pvt. Ltd for his outstanding dues along with compensation. In the month of Jan’22, Mr. A won the legal case and the Court directed XYZ Pvt. Ltd. to pay Rs 2 crores along with compensation of Rs 4 crores and interest of Rs. 1 cr. on account of delay in the payment. Query:
1. Whether this amount received of Rs. 5 Cr (including Interest of Rs. 1 crore) is liable for GST.
2. If answer to the 1 point is yes, what will be the time of supply for payment of GST for this receipt?
3. GSTR-9 and 9C for the FY 2019-20 is yet to be filed. Can this compensation be reported along interest in GSTR-9 and 9C for the FY 2019-20?
4. If the time of supply falls in Jan’22, how can GST be paid on the same in the current year?

ANSWER

Facts of the case:

Supply of professional services were made in the period of July 2019 - December 2019 for a consideration of Rs. 2 Crore. In the month of January 2022 this consideration along with a compensation of Rs 4 crore and an interest of Rs 1 crore was paid by the recipient.

Law Applicable:

Section 13(6) of CGST dictates the Time of Supply as follows;

"The time of supply to the extent it relates to an addition in the value of supply by way of interest, late fee or penalty for delayed payment of any consideration shall be the date on which the supplier receives such addition in value."

Interpretation:

Since the addition in value of consideration relates to the original supply which was taxable under GST therefore such addition would also be liable to tax.

Conclusion:

So to answer your questions;

Question 1: Whether this amount received of Rs. 5 Cr (including Interest of Rs. 1 crore) is liable for GST ?
Answer: Since the money received is a consideration for a supply defined under section 7(1)(a) CGST, therefore the same shall be levied to GST.

Question 2: What will be the time of supply for payment of GST for this receipt?
Answer: Out of the total payment of 7 crore;
- TOS of original consideration of Rs 2 Crore u/s 13(2)(a) CGST shall be the date of invoice.
- TOS of interest of Rs 1 Crore u/s 13(6) shall be the date on which the supplier receives this payment.
- TOS of enhanced compensation of Rs 4 Crore u/s 13(6) shall be the date on which the supplier receives this payment.

Question 3: GSTR-9 and 9C for the FY 2019-20 is yet to be filed. Can we report this compensation along interest in GSTR-9 and 9C for the FY 2019-20?
Answer: No, the said increase in the value of supply to the tune of Rs 5 Crore shall not be reported in GSTR 9 and 9C of 19-20 since the Time of supply of this enhanced consideration falls in the year 21-22.

Question 4: If the time of supply falls in Jan’22, how can we pay GST on the same in the current year?
Answer: Since TOS for 5 crore has occurred in the current year of 2022 therefore a fresh registration shall be applied for and the tax liability shall be discharged u/s 73 through DRC03 challan. (Reply dt. 30/03/2022)