An Authority for Advance Ruling (AAR) has ruled that interest for overdue payment on imported products is liable to GST under reverse-charge, which could affect many companies at a time when the Covid pandemic has disrupted supply chains and payment systems.
According to the facts of the case, an Indian subsidiary of a Turkey-based transformer part manufacturer imported products. The Indian arm had secured a credit facility from Citi Bank based on the holding company’s corporate guarantee. A stamp duty had to be paid on behalf of the Indian arm by the Turkey-based corporation, and a refund invoice was raised for the recovery.
The Indian arm had approached the AAR to find out if GST was payable on late payments of imported products and if the sum charged for stamp duty refund was subject to GST. The holding company had “tolerated the act” of collecting payment after a period of 120 days had passed from the date of the invoice for goods supplied to the Indian arm, according to AAR. According to a research note by Nangia Anderson, interest had to be charged by the Indian arm, which is liable for GST under the reverse charge mechanism.
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Hello, my name is Anuj Boruah. I am quite interested in writing about current events in business, finance, and the economy. I work as a newswriter at Reviewminute.
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