Home Case Index All Cases GST GST + AAAR GST - 2022 (11) TMI AAAR This
Forgot password New User/ Regiser ⇒ Register to get Live Demo
2022 (11) TMI 209 - AAAR - GSTLevy of GST - Supply or not - liquidated damages recoverable by the applicant from Belectric India on account of delay in commissioning - time of supply when liability to pay GST is triggered - HELD THAT:- The CBIC has issued Circular No. 178/10/2022-GSTdated:3.8.2022 related to GST applicability on liquidated damages. As per para 7.1.6 of the said circular, it was, interalia, observed that when principal supply is exempt, the ancillary activities to such principal supply would not get attracted to GST - Since in the present case, the applicant’s principal supply is production and distribution of electricity, which is exempt from payment of GST, the liquidated damages received by the applicant towards such supply need to be considered as flow of money without having implication of GST payment. As per the circular where the amount paid as ‘liquidated damages’ is an amount paid only to compensate for injury, loss or damage suffered by the aggrieved party due to breach of the contract and there is no agreement, express or implied, by the aggrieved party receiving the liquidated damages, to do or abstain from doing anything for the party paying the liquidated damages, in such cases liquidated damages are mere a flow of money from the party who causes breach of the contract to the party who suffers loss or damage due to such breach. Such payments do not constitute consideration for a supply and are not taxable. Appeal disposed off.
|