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2023 (6) TMI 1229 - AUTHORITY FOR ADVANCE RULING, TELANGANAScope of assessment under GST Act, 2017 - contract completed during the Pre-GST period and demand based on the completed contract can be brought to assessment under GST Act, 2017 or not - liquidated damages, without any supply of materials and labor - arbitral award, in the nature of compensation, payable for delay in completion of the contract and agreed to be payable by the Applicant to DGAL without any supply of goods or services - ITC on the GST amount if any levied on the mutually agreed arbitral award amount received from the Applicant - taxability under GST on Interest payable on the liquidated damages?' Whether a mutually agreed amount for settling a dispute arising out of breach of contract constitute a supply within the scope of Entry 5(e) of Schedule-II to the CGST Act, 2017 and hence taxable? HELD THAT:- Circular No. 178/10/2022-GST dated 03-08-2022 discusses the taxability of an activity on a transaction as supply of service of agreeing to the obligations to refrain from an act or to tolerate an act or a situation, or to do an act under the GST. This includes applicability of GST on payments in the nature of liquidated damage, compensation, penalty, cancellation charges, late payment surcharge, etc., arising out of breach of contract or otherwise and scope of entry at para-5(e) of schedule-II of Central Goods & Service Tax Act, 2017. The flow of consideration in the instant case fall under para-7.1.3 and para-7.1.4 of circular No. 178/10/2022, dated: 03-08-2022, therefore such consideration as stipulated in the said circular are not taxable as there is no supply of service under entry-5(e) of Schedule-II of the CGST Act, 2017. In the instant case, as no supply has happened during the GST regime as per Section 142(10) of the act ibid no GST shall be payable. Further the additional payment received by way of compensation through award by Hon’ble Tribunal for Arbitration is not falling under Section 142(2)(a) and hence not chargeable to GST.
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