This circular provides a corrigendum to Circular No. 102/21/2019-GST dated 28 June 2018 by correcting the wording in paragraph 5 relating to the GST treatment of additional or penal interest.

The corrigendum clarifies the position in “Case 2” discussed in the earlier circular, where additional or penal interest is charged in a transaction between a customer and a financier and such transaction is covered under Sl. No. 27 of Notification No. 12/2017–Central Tax (Rate) dated 28 June 2017. It reiterates that penal interest charged in such cases is not subject to GST, as it is not covered within the scope of taxable supply under the said notification.

Further, it confirms that the value of supply of goods (illustrated in the example as supply of a mobile phone) for the purpose of levy of GST shall be the original transaction value, excluding the penal interest component. Accordingly, GST is payable only on the principal value of supply and not on the penal interest charged separately.

This corrigendum has been issued to remove ambiguity and ensure correct interpretation of the earlier clarification.