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TMI Blog2018 (5) TMI 1332X X X X Extracts X X X X X X X X Extracts X X X X ..... ompany to tolerate it. - If an agreement has such a clause and if the eventuality actually happens then the GST Act has provided for such an eventuality. The activity is falling within the scope of clause(e) of para 5 of the Schedule II of GST Act, which is read as, agreeing to the obligation to refrain from an act, or to tolerate an act or a situation, or to do an act; In terms of the aforesaid agreement, GST would be applicable on the Liquidated Damages. Classification of service - It would fall within the Heading 9997 - Liable to be taxed @18%. Time of supply of services - Scope of agreement - In terms of the aforesaid agreement, the clauses reveal that the levy of liquidated damages is not when the delay is occurring but the liability of payment of these liquidated damages by the Contractor will be established once the delay in successful completion of trial operation is established on the part of the Contractor. This would define the time of supply. Where the part of liquidated damages pertains to per-GST, would GST be applicable - Held that:- The question is based on some incorrect presumption owing to which the applicant seems to have adopted some method of ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... or/vendor will be able to utilize the amount of LD imposed over him as Input Tax Credit subject to satisfying all other conditions? At the outset, we would like to make it clear that the provisions of both the CGST Act and the MGST Act are the same except for certain provisions. Therefore, unless a mention is specifically made to such dissimilar provisions, a reference to the CGST Act would also mean a reference to the same provision under the MGST Act. Further to the earlier, henceforth for the purposes of this Advance Ruling, a reference to such a similar provision under the CGST Act / MGST Act would be mentioned as being under the GST Act . 02. FACTS AND CONTENTION - AS PER THE APPLICANT The submissions, as reproduced verbatim , could be seen thus- Background Maharashtra State Power Generation Company Limited (Mahagenco) is a State Power Utility engaged in generation of power with objective to make Power available to all at affordable rates. In case of various contracts entered into by the company, there is a clause to deduct Liquidated damages (LD) in case of default by the contractor / vendor to complete the work in time. The L ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... relating liquidated damages from one of the contracts pertaining to erection, testing and commissioning is reproduced below - 7.0 LIQUIDATED DAMAGES FOR DELAY IN ERECTION, TESTING AND COMMISSIONING 7. 1 The Contractor shall strictly adhere to the Protect completion schedule to achieve the trial operation in accordance with the project completion schedule. In case the Contractor fails to achieve successful completion of Trial Operation due to delay on his part, then the Owner shall levy liquidated damages. 7.2 Time Schedules indicated for various activities are for the purpose of monitoring to ensure work completion as per Project Completion Schedule. Only the successful completion of Trial Operation of the unit shall be considered for the purpose of levy of Liquidated Damages. 7.3 The payment by Contractor or deduction by Owner of any sums under the provision of this clause shall not relieve the Contractor from his obligations to complete the works or from his other obligations under the contract. 7.4 The liability of payment of these liquidated damages by the Contractor will be established once the delay in successful completion of tri ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... OMMISSIONING 7. 1 The Contractor shall strictly adhere to the Protect completion schedule to achieve the trial operation units 8 9 by 41 and 44 months respectively. In case the Contractor fails to achieve successful completion of Trial Operation within specified time period as per the project completion Schedule due to delay on his part, then the Owner shall levy liquidated damages. 7.2 Time Schedules indicated for various activities are for the purpose of monitoring to ensure work completion as per Project Completion Schedule. Only the successful completion of Trial Operation of the unit shall be considered for the purpose of levy of Liquidated Damages. 7.3 The payment by Contractor or deduction by Owner of any sums under the provision of this clause shall not relieve the Contractor from his obligations to complete the works or from his other obligations under the contract. 7.4 The liability of payment of these liquidated damages by the Contractor will be established once the delay in successful completion of trial operation is established on the part of the Contractor and the Owner shall not be required to lake any further action like arbitra ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... a) To pass a ruling to decide whether the recovery of Liquidated Damages from the invoice of the contractor amounts to supply under Section 7 of the GST Act. b) In case the GST is payable on the Liquidated Damages, will the rate of GST be classified as a separate supply or will it be classified under the category in which the services of the contractor are classified? c) Whether the GST on liquidated damages is covered under Schedule II entry no.5(e) vide HSN code 9997-Other Services rate 18% is correct or any other entry is relevant? d) what will be construed as the time of supply. Will it be the period in which delay is occurring or it is the time when decision to impose liquidated damages is taken? e) If some part of delay has occurred before GST roll-out and some part of delay has occurred after GST roll-out, whether GST will be applicable to the liquidated damages imposed for entire period of delay or to the period falling after GST roll-out? In case when GST is to be imposed for period after date of GST rollout but due to maximum capping of liquidated damages, the amount of liquidated damages is calculated at given percentage inste ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... bout the way in which the relevant provision applies or would apply to the entities, generally to a class of entities in relevant to a particular scheme. The Commissioner issued the public ruling on the payment of damages on early termination of lease of goods, cancellation of contracts and out of court settlements where in they had discussed the taxability of the liquidated damages. The same along with cases and books has been discussed as follows:- In GSTR 2003/11 of Goods and service tax ruling relating to payment on early termination of lease of goods, it was clarified that if clause relating to early termination has been specified in the original contract of lease and early termination has been in accordance with the said contract than termination payment will be considered as change of consideration of earlier supply (i.e. re-determination of consideration). It will not be considered as separate supply, but will be considered as adjustment event in relation to that earlier supply. The book Australian Master GST Guide written by Philip McCouat (2014) 15th Edition contains Australian GST Act and application of the same. The paragraph 4-085 deals with damage awards and ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... is reproduced below: 2 . These representations have been examined. The Service Tax Rules, 1994 require that invoice should be issued within a period of 14 days from the completion of the taxable service. The invoice needs to indicate inter alia the value of service so completed. Thus, it is important to identify the service so completed. This would include not only the physical part of providing the service but also the completion of all other auxiliary activities that enable the service provider to be in a position to issue the invoice. Such auxiliary activities could include activities like measurement, quality testing, etc. which may be essential pre-requisites for identification of completion of service. The test for the determination whether a service has been completed would be the completion of all the related activities that place the service provider in a situation to be able to issue an invoice. However, such activities do not include flimsy or irrelevant grounds for delay in issuance of invoice. Thus, the Ancillary work is required to be completed for the completion of service. In this case, the ancillary work i.e. discussion with the contrac ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ON) 2015 (11) TMI 893 - CESTAT NEW DELHI 2. VICTORY ELECTRICALS LTD 2013 (290) E.L.T. 534 (Tri. - LB) = 2013 (12) TMI 81 - CESTAT CHENNAI 3. MRS. Priyaraj Electronics Ltd Versus Commissioner of Central Excise Bangalore 2016 (6) TMI 873 - CESTAT BANGALORE 4. UNITED TELECOM LTD 2006 (204) E.L.T. 626 (Tri. - Bang.) = 2006 (9) TMI 321 - CESTAT, BANGALORE b. Under GST law section 15(1) of the CGST act, 15. (1) The value of a supply of goods or services or both shall be the transaction value, which is the price actually paid or payable for the said supply of goods or services or both where the supplier and the recipient of the supply are not related and the price is the sole consideration for the supply. Section 15 of the CGST Act 2017, which is similarly worded i.e. The transaction value is which actually paid or payable hence we can say that the ratio of the above cited judgements can also be applied to the section 15(1) of the CGST Act, 2017 and it can be concluded that resultant price after Liquidated Damages would be the transaction value under section 15(1) of the CGST Act, 2017. ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... After taking the X-ray, he used to give technical advice to his patients and was charging a flat rate towards his remuneration and cost of materials. Sales Tax Officer was of the view that the turnover arising from such transactions was liable to tax under the Act. The hon'ble High Court of Orissa held that; 'Mere passing of property in an article or commodity during the course of the performance of the transaction in question does not render it a transaction of sale. For, even in a contract purely of work or service, it is possible that articles may have to be used by the person executing the work and property in such articles or materials may pass to the other party. That would not necessarily convert the contract info one of sale of those materials. In every case the court would have to find out what was the primary' object of the transaction and the intention of the parties while entering into it.' Similarly, in case of Liquidated Damages settled in case of Lumpsum Turn-key ('LSTK') contracts, one really needs to appreciate whether settlement so made under LSTK contracts (say for constructing and delivering a Power plan ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... Additional submission on 07.03.2018 1. We thank you very much for patient hearing on 28.02.2018 on the above application. As submitted during the hearing following additional submission/documents are submitted: - i) Manner of Recovery . As directed, a specimen running bill raised by M/s Bharat Heavy Electricals Limited, bearing no. MS/PW/9515/13/1027(89) is attached as Annexure -l. ln this case 15% of the invoice amounting to ₹ 56,29,471/- has been deducted as retention This amount is deducted on invoice value of ₹ 3,75,29,810/- For the sake of clarification as to retention @ 15% towards LD, when the maximum limit of LD is prescribed at 10%, it is to submit that in case of bills which were received and passed for payment before the scheduled completion date, no deduction is made on account of retention towards LD. After the expiry of scheduled work completion period, if the work is still not completed, the applicant starts making deduction towards LD as retention amount. Since, the probable LD @ 10% will be imposed upon the entire contract value, the retention from each bill received after scheduled completion period is to ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ent Gross v Maytex Knitting Mills of Cal.. 116 C.A. 2d 705, 254 P. 2d 163, 167 See separability clause. When a contract is severable, a breach may be found to constitute a default as to only the specific part breached, thus relieving the defaulting party from liability for damages for breach of the entire contract Hence, the execution of the contract and deduction cannot be enforced separately. The delay in supply will always precede deduction of liquidated damages, thus, deduction of liquidated damages cannot be independently enforced. Hence it is submitted that the contract is for single supply and not for the two supplies. In any contract if the activities are depended on each other and it cannot be performed individually, then there will not to be two separate supplies. In a contract two supplies can be considered only when two supplies are independent and not depending on each other. In this case, the deduction of the amount is determined on delay in making supply of goods or services by the contractor. Unless, there is delay the clause of liquidated damage will not apply Therefore, it is submitted that contract is single supply and not for two separat ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... med or, as the case may be, the penalty stipulated for. Explanation. A stipulation for increased interest from the date of default may be a stipulation by way of penalty. Exception. When any person enters into any bail-bond, recognizance or other instrument of the same nature, or, under the provisions of any law, or under the orders of the 2[Central Government] or of any [State Government], gives any bond for the performance of any public duty or act in which the public are interested, he shall be liable, upon breach of the condition of any such instrument, to pay the whole sum mentioned therein. Explanation. A person who enters into a contract with Government does not necessarily thereby undertake any public duty or promise to do an act in which the public are interested. It has been consistently held that liquidated damage is to compensate the person for loss suffered by him. The amount of loss suffered by appellant due to delay as mentioned in the contract. Therefore, it is submitted that the damages are not received by the person for the toleration of an act, but it is made for compensate the loss suffered by the appellant. Therefore, it is submitted ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... te of GST rollout but due to maximum capping of LD, the amount of LD is calculated at given percentage instead of being period-based, then how GST needs to be levied. (d) Whether the contractor/vendor will be able to utilize the amount of LD imposed over him as Input Tax Credit subject to satisfying all other conditions? a) GST on LD is covered under Schedule II entry no 5(2) (e), GST rate will be as per the contract on which LD is imposed. b)Time of Supply of Services in GST is when any 2 of following conditions are fulfilled; i. Date of Service invoice raised ii. Dale of Service performed iii. Date of payment received Section 13(2) of MGST Act. c) As above d) Contractor/Vendor may get input Tax Credit subject to satisfying all other conditions. 04. HEARING The case was taken up for preliminary hearing on dt.06.02.2018 when Sh. S. S. Gupta, Sh. Karan Awtani, Sh. Ashutosh Shukla (all Chartered Accountants) attended alongwith Sh. Pankaj Sharma, Chief General Manager (Accounts) and Sh. Vijay Chitlange, General Manager (Accounts) and submitted that their Advance Ruling (AR) application is for query covere ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... mal course of business of generation and sale of power, Mahagenco enters in to various contracts with vendor for providing materials and services for operational activities. In this case, if there is delay on the part of the contractor to provide materials / services; Liquidated damages (LD) are deducted from the amount payable to vendor. The LD so deducted is treated as income Type 2 : Construction of new power plants or renovation of old plants In this regard, normally the contract is awarded to vendors to build the plant on Turnkey basis. Normally the contracts are awarded in three parts, supply of materials, erection and commissioning and Civil work. As per terms and conditions, the period of completing the contract is fixed. When plant construction is completed, the actual time taken for completion of contract is calculated. If there is delay in completing the contract, the assessment regarding party responsible for delay is made. If the delay is on account of contractor, then Liquidated damages (LD) are calculated as per contract terms and levied upon the contractor. In accounting, the LD imposed is reduced from the total project cost while capitalising th ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... re Twenty Eight Lakh Twenty Thousand only) (hereinafter called the Contract Price ) which is accepted by the Contractor vide their Letter No. MS-4-08-0007/0008 dated 31.07.2008 and Letter No. MS-4-08-0007/0008 dated 09.02.2009. Now this Contract Agreement witnesseth as follows: 3. in consideration of the payments to be made by the Owner to the Contractor as hereinafter mentioned, the Contractor hereby covenants with the Owner to provide the goods and to remedy defects therein in conforming in all respects with the provisions of the Contract. 4. The Owner hereby covenants to pay the Contractor in consideration of the provision of the goods and the remedying of defect therein, the Contract Price or such other sum as may become payable under the provisions of the Contract at the times and in the manner prescribed by the Contract Letter of Award dt.25.07.2008 2.0 SCOPE OF CONTRACT 2.1 The scope of contract shall include receipt of materials/ equipment, unloading and handling at site, transportation to stores, storage, checking of materials in stores, transportation of material to erection site, carrying out preparatory works prior to erection of material, ins ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... al indices prevailing at that time whichever is lower. In case the contractual period is extended for the reasons attributable to the Owner in such an event the price variation shall be payable on the extended period of contractual cut off dates, based on the prevailing price indices. 8.0 PROJECT COMPLETION SCHEDULE 8.1 The Contractor shall so organize his resources and perform his works as per the Project Completion Schedule enclosed herewith so as to achieve synchronization and Trial Operation of the Unit as below. Period in months from the zero date Unit-1 Unit-2 Unit Synchronization : 38 (Thirty-eight) 41 (Forty-one) Trial Operation 41 (Forty-one) 44 (Forty-four) 9.0 ZERO DATE 9.1 The zero date for the contract for Erection, Testing Commissioning against this Letter of Award shall be the zero date as per the Letter of Award for supply of Main Plant Equipment under ref. 13. 10.0 LIQUIDATED DAMAGES 10.1 If the Contractor fails to achieve the t ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ₹ 2,45,00,00,000/- ii) Service tax Including applicable Cess @ 12.36% ₹ 30,28,20,000/- Total Price for Erection, Testing Commissioning of Main Plant Equipments including Comprehensive Insurance (Rupees Two Hundred Seventy eight Crores Twenty Eight Lakh Twenty Thousand only) Rs.2784280800/- Section 2 - General Conditions of Contract 3.0 DEFINITION OF TERMS 3.9 works shall mean labour and services and complete erection, testing and commissioning of the equipment handling, unloading, storage etc. as per contract. 3.13 (A) Contract Price shall mean the total lump-sum price named in the contract for providing all services as per the scope of the contract including all applicable taxes, duties insurance charges. (B) Total Contract Price means the contract price plus the price variations, if any. 3 14 Contract value shall mean that part of the contract price which is properly apportionable to the plant or work in question having regard to the state, conditions and topographical location of the plant, the amount of work done and ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... lance due to the contractor, the contractor shall pay such excesses. Such payment of excess amount shall be independent of the liquidated damages for delay which the contactor shall have to pay if the completion of works is delayed. In addition, such action by the owner as aforesaid shall not relieve the Contactor of his responsibility to pay liquidated damages for delay in completion of the works as defined in this contract. 51.0 OWNERSHIP OF PLANT 51.1 The plant and equipment supplied by the Contractor pursuant to the contract shall become the property of the Owner at whichever is the earlier of the following limes viz. i) When the plant and equipment is delivered/despatched pursuant to the contract ii) When the contractor has been paid any sum to which he may become entitles in accordance with the provisions of this contract. iii) Plant is otherwise taken over by the owner in terms of contract. Section 3 - Special Conditions of Contract 7.0 LIQUIDATED DAMAGES FOR DELAY IN ERECTION, TESTING AND COMMISSIONING 7. 1 The Contractor shall strictly adhere to the Protect completion schedule to achieve the trial operation units 8 9 by 41 and 44 ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... Liquidated Damages for each unit shall be levied separately and for this purpose, price of one unit shall be half of the price of both the units. 13.5 PAYMENT TOWARDS ERECTION, TESTING AND COMMISSIONING 13.5.1 10% (ten percent) advance on the price for Erection, Testing Commissioning of Equipments alongwith applicable service tax education cess but excluding insurance charges shall be paid within 30 (thirty) days of fulfillment of the following by the Contractor i .............................. 13.5.2 85% (Eighty five percent) i.e. (95% of the contract price for erection, testing commissioning of equipments less 10% advance adjustment) of the price for erection, testing commissioning along with applicable 100% Service tax education cess as per agreed billing break up shall be paid on prorata basis. .................................... The following documents shall be submitted .............. i) Invoice 1 Original + 2 copies 13.5.3 The next 5% (five percent) of the price for erection, testing commissioning shall be released within 30 days on Successful Completion of Performance Guarantee test. In case Performance Guarantee test is delayed beyond ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... of payment of these liquidated damages by the Contractor will he established once the delay in successful completion of trial operation is established on the part of the Contractor. 3. Both the events have their consequences. The first event calls for the payment of a contract price to the Contractor. The second event calls for payment of liquidated damages to the Owner. 4. The manner employed for recovery of the contract price or the liquidated damages would not define what a contract price or the liquidated damages mean. 5. The deduction from the amount as payable to the Contractor is for the purposes of adjustment of the accounts. 6. Though the situation is so, even if the agreement had clauses regarding deductions form the contract price, we are convinced that we wouldn't have had a different opinion than the one as taken above. Both the contract price and the levy of liquidated damages are distinct events. 7. In the present case, we find that even the agreement does not support the act of deduction from the contract price as can be seen thus - a. The clause relating to contract price and contract value say thus - 3.13 (A) Contract Price shall mean t ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... t. These amounts may be recovered by actions of law or otherwise, if the Contractor fails to satisfy the Owner of such claims. A perusal of the above clause suggests that when the Owner incurs certain expenses which should have been borne by the Contractor, there is a separate mechanism of recovery also other than recovery by way of adjustment from the payments to be made to the Contractor. d. There is also a clause about Contractor's default thus - 21.0 CONTRACTOR'S DEFAULT 21.1 If the contactor shall neglect to execute the works us defined in the contract with due diligence and expedition or shall refuse or neglect to comply with any reasonable orders given to him in writing by the Engineer in connection with the works or shall contravene the provisions of the contract, the Owner may give a notice in writing to the contractor to make good the failure, neglect or contravention complained off Should the contactor fail to comply with the notice within 30 (thirty) days from the date of service thereof, then and in all such cases, the owner shall be at liberty to employ other workmen and forthwith execute such part of the works as the contractor may have neglected ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ompln of P G. Test(5%) 18,76,491 1876491 Retention 4. Net Billing (4) = (1)-(2)-(3) 319,00,339 759033 Tax 5. Service Tax @12.36% on 90% billing 41,74, 816 5629471 against L. D - 15% 6. Net billing with Service Tax (6) = (4)+(5) 360,75,155 12017976 Deductions 29686680 N pay What the above rough calculations as shown by the applicant reveal is that the amount shown as Net and Tax is acceptable to the applicant. It is only while making the payment of the above acceptable amount that the applicant deducts some amount towards liquidated damages. Thus, the value of the work done and which is to be paid is not affected by the amount deducted therefrom towards liquidated damages. Thus, the consideration for the work done remains unaltered. How the amount for the work done is discharged between the parties should not bother the Taxmen as these are the adjustm ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... n the agreement to arrive at the contract value or the invoice value. The words price actually paid or payable in respect of the value of the goods or services supplied do not come into play in the present set of facts of deduction of the amount towards liquidated damages. We have seen above that this deduction does not mean that the price actually paid is less. The income of the applicant is recovered by deducting from the outgoings of the applicant. This would not translate into making the income of the applicant as being the other party's lesser income or the applicant's lesser expenditure. We have seen above that the contract price and the liquidated damages are independent events. 9. We find that the applicant has argued that it was never the intention of the company to get its supplies/project delayed nor the contractors want to make delay and thereby causing company to tolerate it. In this regard, we have to observe that if an agreement has such a clause and if the eventuality actually happens then the GST Act has provided for such an eventuality in terms of the provision as follows : SCHEDULE II [See section 7] ACTIVITIES TO BE TREATED AS SUPPLY OF GO ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... tract price or the contract value of the supplies of goods or services or both as made by the Contractor. In fact in the present case, the levy of liquidated damages is specifically identified as an independent levy. We have seen that the Contract Price Variation clause in the impugned agreement, does not provide for variation on account of liquidated damages. And above all, we have seen the intent as being reflected in the treatment of the parties as not to alter the value of the work done and the tax liability on such value while making deductions therefrom. The reliance on case laws is, therefore, not helpful to the applicant. The facts of the instant case before us being distinct, we would refrain from discussing the other points in support of the contention. Having seen as above, we refer to the questions as posed for our decision. Question 1 Whether GST is applicable on Liquidated Damages in case of Type 1 i.e. Operation Maintenance activities Type 2 i.e. Construction of new power plants or renovation of old plants Or is applicable in both cases? We have not been provided with separate agreements in respect of the situations posed above. The ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... r the impugned levy of liquidated damages S. No. Chapter, Section, Heading, Group Description of Service Rate (per cent.) [CGST + MGST] 35 Heading 9997 Other services (washing, cleaning and dyeing services; beauty and physical well-being services; and other miscellaneous services including services nowhere else classified). 18% [9% + 9%] b) Liquidated Damages is determined and imposed upon the contractor after in-depth study. In such case, what will be construed as the time of supply. Will it be the period in which delay is occurring or it is the time when decision to impose Liquidated Damages is taken? We would be constrained to restrict the answer to this question in terms of only the agreement placed before us. The question would stand answered by the following clauses in the agreement - 10.0 LIQUIDATED DAMAGES 10.1 If the Contractor fails to achieve the trial operation of the unit within the stipulated time period as indicated above from the zero date then the Owner shall levy Liquidated Damages on ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ed in the Project Completion Schedule due to reasons attributable to him then the owner shall levy Liquidated damages on the Contractor @1/2% of the contract price for erection, testing and commissioning (excluding insurance charges, taxes and duties) along with applicable price variation per week of delay or part thereof subject to the maximum 10% of the contract price for erection, testing and commissioning (excluding insurance charges, taxes and duties) along with applicable price variation. 7.7 For the purpose of deciding the amount of Liquidated Damages on the erection price, contract price along with the applicable price variation (excluding taxes, duties and insurances charges.) as per contact price adjustment shall be considered. Further Liquidated Damages for each unit shall be levied separately and for this purpose, price of one unit shall be half of the price of both the units. All the above clauses reveal that the levy of liquidated damages is not when the delay is occurring. The Agreement expressly provides that liability of payment of these liquidated damages by the Contractor will be established once the delay in successful completion of trial ope ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... he Maharashtra Goods and Services Tax Act, 2017) NO. GST-ARA-15/2017-18/B-30 Mumbai dt. 08/05/2018 For reasons as discussed in the body of the order, the questions are answered, as under, in terms of the agreement between Maharashtra State Power Generation Company Limited (Owner) and Bharat Heavy Electricals Limited (Contractor) for Erection Commissioning of Main Plant Package at Chandrapur T.P.S. Expansion Project 2 x 500 MW - Q.1 Whether GST is applicable on Liquidated Damages in case of Type 1 i.e. Operation Maintenance activities Type 2 i.e. Construction of new power plants or renovation of old plants Or is applicable in both cases? A.1 In terms of the aforesaid agreement, GST would be applicable on the Liquidated Damages. Q.2 If GST is applicable, kindly clarify the following related aspects also - Q.2(a) Whether the GST on Liquidated Damages is covered under Schedule II entry No 5(2)(e) vide HSN code 9997-Other Services rate 18% is correct or any other entry is relevant? A.2(a) In terms of the aforesaid agreement, schedule entry no.35 of the Notification no.11/2017 - Central / State Tax (Ra ..... X X X X Extracts X X X X X X X X Extracts X X X X
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