No GST on fines, penalties, late fees collected by RBI, says Maha AAR
Reserve Bank of India will not have to pay Goods & Services Tax (GST) on fines, penalty collected from its regulated institutions, Maharashtra’s Authority for Advance Rulings (MAAR) has said.
RBI, moved to MAAR to get advance rulings on two questions – first, whether the penalties, late fee/penal interest, find of the nature, levied and collected for contravention or violation of law are taxable under GST and second, whether the penalty of the nature for non-performance or under performance as per contractual agreement by the RBI with the third-party vendors are taxable under GST.
The central bank drew attention to a 2017 circular, where it was said: “penalties imposed for violation of laws cannot be regarded as consideration charged by the government or a local authority for tolerating violence of laws.”
Further it was said that laws are not framed for tolerating their violation. They stipulate penalty not for tolerating violation but for not tolerating, penalising and deterring such violations.
