Madhya Pradesh AAR holds that delayed payment surcharge/ Late payment surcharge/Surcharge on outstanding amount cannot be treated a separate service but is includible in value of initial service i.e. Transmission/ distribution of electricity.
Notes that applicant, engaged in rural electrification work and supply of electricity to commercial and non-commercial consumers, is eligible for exemption from levy of GST under Entry No. 25 of Notification No. 12/2017 – Central Tax (Rate); Remarks that, “component of interest and delayed payment charges are obviously having a direct relation with the value of supply to which such interest/delayed charges relate. These are in fact components of the value of supply and do not have any independent status”; Explains that Delayed payment surcharge is a part of Tariff prescribed by MPERC and Company recovers such charges at rates fixed by Authority, thus “nature of the service is interest/late fee/penalty for delayed in payment of consideration” which falls within scope of Section 15 dealing with ‘Value of Supply”;
Observes further that, in present case, supply is of both exempted (i.e. distribution and transmission, retail supply of electricity) and taxable supply (i.e. other services as per Circular No. 34/8/2018, dated March 1, 2018); Accordingly concludes that “portion of Delayed payment surcharge attributable to exempted supply will be exempted and portion attributable to taxable supply will be taxable at the rate at which the corresponding supply is taxed”