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TMI Blog2022 (11) TMI 550X X X X Extracts X X X X X X X X Extracts X X X X ..... Whether GST is payable on the claim of INR of Rs. 1,15,80,62,000/- (including interest amount) on account of compensation of additional cost incurred due to delay in issue of drawings and failure of HGCL to handover site on time and refusal to issue the taking over certificate? - HELD THAT:- As per the claim documents submitted before the lower authority, not disputed by the applicant, the amount was towards compensation for delay in execution of the works and prolongation costs. When a subjective meaning is deciphered from the phase used by the applicant themselves, the amounts were recovered as compensation for delay in execution of the works. That is to say that the applicant had received the amount to agreeing to the obligation to refrain from an act, or tolerating an act or a situation that arose due to delay in execution or protraction or elongation of work. This is nothing but compensation for refraining to do an act or tolerating to do an act. The consideration received for such act is taxable @ 9% each under CGST and SGST and falls under Ch Head 9997 at Sl.No. 35 of Notfn No. 11/2017-CT (rate). Appeal disposed off. - AAAR.COM/05/2022 Order-in-Appeal No. AAAR/11/20 ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... after referred to as TGST Act, 2017 or the Act , in short) M/s Continental Engineering Corporation, F.No. 102, 1st Floor, Boston Towers, Upparpally, Rajendernagar, Ranga Reddy, Telangana 500 048 (hereinafter referred in short as the appellant ). The appellant is registered under GST having GSTIN number 36AACCC6948C1ZQ, is a civil engineering construction company. They are engaged in the construction of highway, tunnel, bridge, mass rapid transit and high speed rail projects. The appeal is filed against the Order No.13/2021 dated 08.10.2021( impugned order ) passed by the Telangana State Authority for Advance Ruling (Goods and Services Tax) ( Advance Ruling Authority / AAR / lower Authority ). Brief Facts: 2. M/s Continental Engineering Corporation, F.No. 102, 1st Floor, Boston Towers, Upparpally, Rajendernagar, Ranga Reddy, Telangana 500 048. They are engaged in the construction of highway, tunnel, bridge, mass rapid transit and high speed rail projects. 3. The applicant has sought clarification before the lower authority in respect of following activities vis a vis their taxability under Goods and Services Tax Act. Sl. No. ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... rbitration as service was supplied independently after the introduction of GST i.e., the tribunal was constituted conclusively on 20.11.2017 and rendered its orders on 09.05.2019 and therefore this supply is liable to tax on reverse charge basis under GST. 2. Liquidated damages: These damages are claimed by the applicant from the contractee due to the delays in making available possession of site, drawings other schedules by the contractee beyond the milestones fixed for completion of project. These damages are consideration for tolerating an act or a situation arising out of the contractual obligation. The entry in 5(e) of Schedule II to the CGST Act classifies this act of forbearance as follows: 5(e): Agreeing to the obligation to refrain from an act, or tolerate an act, or a situation, or to do an act. Further Section 2(31)(b) of the CGST Act mentions that consideration in relation to the supply of goods or services or both includes the monetary value of an act of forbearance. Therefore such a toleration of an act or a situation under an agreement constitutes supply of service and the consideration or monetary value is exigible to tax. The arbitration award sp ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... .7.2020 with regard to extension of limitation under GST law in terms of Hon ble Supreme Court order dt.27.04.2021. 7. Having regard to the facts and circumstances expressed by the applicant, we condone the delay in filing the present application and proceed to address the issues raised by the applicant. Personal Hearing: 8. In terms of Section 101(1) of the Act, the appellant was given personal hearing on 29.4.2022. Shri Rajat Mohan, CA and Ms. Priyanka Sachadev, CA and Authorised Representatives appeared for the Appellants. They reiterated their written submissions made along with the application. They requested to set aside the advance ruling in respect of said issue that are being contested and consider their appeal favourably. Discussions and Findings: 9. The applicant has sought rulings before this Appellate Authority on the following questions: a) Whether GST is payable on the claim of INR Rs. 2,20,00,000/-for the HGCL share of sitting fees and other expenses paid by the applicant on the directions of the Arbitrators for an amount. b) Whether GST is payable on the claim of INR Rs.1,15,80,62,000/-(including interest amount) on account of compen ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... that in case of any delay in issuance of drawings or failure to give possession of site the engineer shall determine the extension of time and amount of cost that the contractor may suffer due to such delays in consultation with the employer and the contractor. Therefore the time of supply of the service of tolerance is the time when such determination takes place. However, the contractee/employer has not determined the cost of delay prior to arbitration award. It was determined only by arbitration award on 09.05.2019. There tore the time of supply of this service as per Section 13 of the CGST Act is 09.05.2019. The Consideration received for such forbearance is taxable under CGST and SGST @ 9% each under the chapter head 9997 at serial no. 35 of Notification No.11/2017-Central/State tax rate. 11.2. While denying, the applicant, submitted that the amounts claimed are towards there imbursement of additional costs incurred during extended period while performing the work. It is not a consideration towards the supply of goods and services. They also relied on some case law to support their submissions. 11.3. This Authority has carefully gone through the submissions and the case ..... X X X X Extracts X X X X X X X X Extracts X X X X
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