2021 (12) TMI 221 - AAR - GST

Maintainability of Advance ruling application - levy of GST - Liquidated damages for delay in supply as penalty (in nature of penalty) - Liquidated damages for compensation of extra cost on account of default from the supplier (in the nature of abetment to the cost of purchase) - sale of tender form/fees for participation in the tender - HELD THAT - The Applicant, vide their letter dated 25.08.2021 has requested this authority to quash the application filed for advance ruling, quoting the reason that they have already got the clarity on the applicability of GST on the transactions for which advance ruling was sought and that they do not require any further proceedings. Further the applicant has to discharge fee of ₹ 5,000/- each under the CGST Act 2017 as well as KGST Act 2017 as per Section 97(1), whereas the applicant has discharged the fee of ₹ 5,000/- under KGST Act 2017 only and hence the instant application is liable for rejection under Section 98(2) of the CGST Act 2017. The application filed by the Applicant for advance ruling is hereby rejected.

Summary

Issues:
1. Applicability of GST on liquidated damages for delay in supply as penalty.
2. Applicability of GST on liquidated damages for compensation of extra cost on account of default from the supplier.
3. Applicability of GST on sale of tender form/fees for participation in the tender.

Analysis:
The case involved an application for Advance Ruling by a Private Limited Company engaged in manufacturing currency paper and security paper. The Applicant sought clarification on the applicability of GST on liquidated damages and tender fees. The first issue was regarding the GST applicability on liquidated damages for delay in supply as a penalty. The second issue raised was the GST applicability on liquidated damages for compensation of extra cost due to default from the supplier. Lastly, the third issue was related to the GST applicability on the sale of tender form/fees for participation in the tender. The Applicant later requested to withdraw the application as they had obtained clarity on the GST applicability for the transactions in question. However, the application was rejected as the Applicant failed to discharge the required fee under both the CGST Act and KGST Act, which was a prerequisite for such applications. Consequently, the ruling was passed to reject the application for advance ruling based on the non-compliance with fee requirements under the CGST Act.

This judgment highlights the importance of complying with procedural requirements, such as the payment of fees, when seeking an advance ruling. It also underscores the significance of clarity and understanding of the tax implications of various transactions to avoid unnecessary proceedings before the Advance Ruling Authority.