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Compensation whether "furtherence of business" for input tax credit

Compensation whether furtherence of business for input tax credit - Goods and Services Tax - Started By: - Rakesh Chitkara - Dated:- 20-6-2017 Last Replied Date:- 4-7-2017 - FACTS :A developer pays compensation to its customers to compensate for delay and default in handing over of the possession of property within the stipulated time.Compensation will be formula based (more like an interest) calculated based on amounts paid and period of delay.QUERY ::Whether GST will be applicable on this comp .....

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because -ITC is available in terms of the enabling provision which states that services which are used or intended to be used for the purpose of furtherance of business or commerce is available as credit. In case of delayed payment of compensation, it may be a bit difficult to establish the such delay is for the furtherance of business or commerce carried on by company. In such a case, availing credit of the same may be prone to dispute.Crux : Whether compensation for default can be treated as .....

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fy this definition, there have to be 2 important things. First, there has to be an ACTIVITY and second there should be a CONSIDERATION for that activity. In our case, activity is that the customer is waiting and giving an extension for completion in exchange of the consideration which will be calculated as per the formula decided. Hence, GST would be levied as this is a supply of service. 2) Whether such tax will be paid under RCM because the customer is an unregistered person ? Yes, as per Sec .....

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