Question39: Interest paid for early payment will attract tax'

Answer We have understood your question as follows:-

A sold material to B on credit of six month but B made payment with in a month and a paid Interest to B.

It is a Supply made by B. This is covered under definition of Supply & will be taxable under category of service @ 18% under residuary clause ( Heading 9997 ).
The classification is done on the basis of clause 5(e) of schedule II of the CGST act. The same is reproduced below:-

SCHEDULE II OF CGST ACT

5. Supply of services

The following shall be treated as supply of service, namely:'
(e) agreeing to the obligation to refrain from an act, or to tolerate an act or a situation, or to do an act; (Reply dt. 12/4/2018)