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TMI Blog2023 (8) TMI 1475X X X X Extracts X X X X X X X X Extracts X X X X ..... would also mean a reference to the same provisions under the SGST Act. 3. The Advance Ruling under GST means a decision provided by the authority or the appellate authority to an applicant on matters or on questions specified in sub-section (2) of section 97 or sub section (1) of section 100 in relation to the supply of goods or services or both being undertaken or proposed to be undertaken by the applicant. 4. As per the said sub-section (2) of Section 97 of the Act advance ruling can be sought by an applicant in respect of:- (a) Classification of any goods or services or both (b) Applicability of a notification issued under the provisions of this Act, (c) Determination of time and value of supply of goods or services or both, (d) Admissibility of input tax credit of tax paid or deemed to have been paid (e) Determination of the liability to pay tax on any goods or services or both (f) Whether the applicant is required to be registered (g) Whether any particular thing done by the applicant with respect to any goods or services or both amounts to or results in a supply of goods or services or both within the meaning of that term. 4.2 In the present case applicant h ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... t recovered against Liquidated Damages (LD) will constitute consideration for a supply and will be taxable. c. The above ambiguity in the circular regarding the taxability of Liquidated Damages (LD) has bearing on the GST liability of the applicant on the amounts recovered as Liquidated Damages (LD) from their vendors. QUESTION In view of the above facts, 'the applicant' is seeking advance ruling as to; Whether GST is applicable on Liquidated Damages recovered from the vendors? APPLICANT SUBMISSION 6. From the record submitted by the applicant we find that applicant is registered in Uttarakhand with GSTIN bearing No. 05AAGCI2642P5Z7. Before proceeding in the present case, we have to first go through the submissions made by the applicant which are as under: i. That they are manufacturing unit and enter into agreements with various vendors for supply of goods and or services, wherein there is a clause, which prescribes that if the contractor fails to deliver the stores or any installments thereof within the period fixed for such delivery or at any time repudiates the contract before the expiry of such period, the General Manger may without any prejudice to the right ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... or implied, by the aggrieved party receiving the liquidated damages, to refrain from or tolerate an act or to do 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." v. That going through these Para's it appears that two viewpoints emerges, one that the contract is entered between two parties for execution and not for its breach and the clause for Liquidated Damages (LD) is mentioned in a contract only to ensure the performance and hence, the amount collected as LD do not constitute consideration for supply and are not table under GST and the other view point is that if there is express or implied agreement for the Liquidated Damages (LD), then the amount recovered against Liquidated Damages (LD) will constitute consideration for a supply and will be taxable. vi. That the above pointed out ambiguity in the circular regarding the taxability of Liquidated Damages (LD) has bearing on the GST liability of the applicant on the amounts ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ld be prudent to go through the provisions of "Supply" and "Consideration" as provided in the CGST/SGST Act, 2017. As per Section supply has been defined as under:- "7. Scope of supply.- (1) For the purposes of this Act, the expression - supply includes- (a) all forms of supply of goods or services or both such as sale, transfer, barter, exchange, licence, rental, lease or disposal made or agreed to be made for a consideration by a person in the course or furtherance of business; [(aa) the activities or transactions, by a person, other than an individual, to its members or constituents or vice-versa, for cash, deferred payment or other valuable consideration. Explanation.- For the purposes of this clause, it is hereby clarified that, notwithstanding anything contained in any other law for the time being in force or any judgment, decree or order of any Court, tribunal or authority, the person and its members or constituents shall be deemed to be two separate persons and the supply of activities or transactions inter se shall be deemed to take place from one such person to another;] (b) import of services for a consideration whether or not in the course or furtherance of b ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... damage suffered by aggrieved party and hence to compensate the monetary loss due to said loss / damages, the damages are liquidated and where the amount paid as liquidate damages is an amount paid only to compensate for such loss or damage. From the above, it is clear that the amount recovered as liquidated damages is neither ad-hoc, unconditional nor at the discretion of the applicant or his vendors. The mathematical terms for calculation of such value clearly indicate that the act of breach is not inconvincible, in the first place. We also find that in the instant case all the three conditions as mentioned at Para 6.1 of the Circular, namely 1. Agreement or Contract 2. Consideration and 3. Contractual agreement is independent arrangements in its own right, are present in the contract entered between the applicant and the vendors and hence the ingredients for taxability are fulfilled. We are also of the opinion that the Para 7.1.3 starts with the words, "It is argued that the performance is the...........", the usage of said words clearly shows that it is a point of view for discussion and understanding of the issue only and not the final view of the Board. Further, at Para 12 ..... X X X X Extracts X X X X X X X X Extracts X X X X
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