Home Case Index All Cases GST GST + AAR GST - 2021 (1) TMI AAR This
Forgot password New User/ Regiser ⇒ Register to get Live Demo
2021 (1) TMI 368 - AAR - GSTLevy of GST - forfeited advance money - amount forfeited on the ground of breach of agreement of sale of land - Service Receiver and Service Provider - sale of land - supply as per Schedule III of GST Act, 2017 - whether forfeiture of advance pertaining to sale of land will be treated as supply and accordingly attract GST? - HELD THAT:- The words ‘agreeing to the obligation’ appearing in clause (e) applies to all the 3 activities. As per the contract, the provider of service here agrees to refrain or tolerate or to do an act. There is specific agreement by the provider to carry out obligation specified in the contract. In case obligation/condition of the contract is not fulfilled by the recipient, then such act is squarely covered under clause 5(e) of Schedule-II. Therefore, this activity constitutes supply in terms of Section 7(1) of CGST Act, 2017 and accordingly is taxable. As per Section 7(1) of the CGST Act, 2017, activities referred to in Schedule II are covered under the scope of supply of goods and service. Clause 5(e) to Schedule II to CGST Act 2017, declares that 'agreeing to the obligation to refrain from an act, or to tolerate an act or a situation, or to do an act' shall be treated as supply of service. The amount, which was received from Mr. B and forfeited by the applicant, was a part of the terms and condition of an agreement held between the applicant and Mr. B (customer). This means that while entering into the agreement, Mr. B was well aware about the terms and condition of the contract that in absence of breach of agreement or non-fulfillment of terms and condition of payment as per the contract, the amount given as an advance would become forfeited by the applicant being settlement of exit of the contract. In other words, Mr. B (customer) has understood and accepted the condition that in the contingency of his inability to fulfill the transaction, applicant can exercise the option of forfeiting the amount received as an advance to agree to the obligation of letting him go, which Mr. B is bound to do as it is part of the terms and conditions of contract already agreed to and settled between them. Thus, the appellant has refrained from taking subsequent action/ tolerated an act of the Mr. B (customer), for which consideration has been received by hm. The purpose of payment of amount is an act of tolerance in the sense that when there is breach of the contract, the appellant is put to certain hardships, which he tolerates in return of the payment received as advance being forfeited. The impugned transaction is also a ‘supply’ under the provisions of the CGST Act and therefore taxable. In our view, therefore, this transaction of the applicant agreeing to the obligation of refrain or tolerate or to do an act (exiting from the contract) on the part of Mr. B (customer), for payment of a sum, will be covered under Clause 5(e) to Schedule II to CGST Act 2017, as a declared service - the GST is leviable on the amount forfeited by the applicant in terms of clause 5(e) of Schedule II to CGST Act 2017.
|